Executive Global Summer 2019 by Executive Global

www.executive-global.com | Summer 2019

Productivity | Strategy | Profitability

MICHAEL PENTO

Examines cycles, QE and asset bubbles

JOHN WILLIAMS

MMT, yield curve inversion and QE

HARRY DENT

Analyses macro economic trends

+ JAVIER VANDE STEEG

Strategy, 1031 exchanges and wealth

ETHICAL FORESTRY INVESTING Rino Solberg’s leading insight on delivering ethical forestry and sustainable investment solutions for affluent institutional and private clients

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CONTENTS

SUMMER 2019

EXECUTIVE GLOBAL

EDITOR-IN-CHIEF John Marshall HEAD OF PRODUCTION Peter Green EDITORIAL Thomas Hughes, Rachel Smith, Oliver Taylor, Shannon Berkley ART DIRECTION & DESIGN Stormcues Limited BUSINESS DEVELOPMENT Steve Williams, David Warmann, Jack Moore, David Goldwin, Mike Walsh COMMERCIAL DIRECTOR Luke Francis PHOTOGRAPHY James Drake, Sarah Dean Executive Global Magazine is published by: Stormcues Limited 405 Kings Road Chelsea London SW10 0BB Tel: +44(0)207 993 4782 www.executive-global.com ADVERTISING advertising@executive-global.com EDITORIAL editorial@executive-global.com The information in this publication has been obtained from sources the proprietors believe to be correct, however no legal liability can be accepted for any errors. No part of this magazine may be reproduced without the consent of the publisher. Executive Global is registered trademark ® of Stormcues Limited. Copyright © 2019 Stormcues Limited. All Rights Reserved.

• Productivity, Strategy, Profitability

FRONT COVER FEATURE Ethical Forestry Investing

Asset price bubbles and more QE 28 24

Our cover feature and CEO Profile on Ethical Forestry Investing explores the contribution of one of Europe’s leading sustainable forestry firms in our interview with Rino Solberg, CEO of Better Globe Group.

It comes down to just 2 things

Catherine O’ Connor, CEO of O’ Connor Portfolio Strategies discusses important considerations when selecting a financial adviser.

Final Trump bubble before crash 32

STRATEGY Strategy and Asset Preservation

Michael Pento, CEO of Pento Portfolio Strategies looks at misallocations of capital, asset bubbles and QE’s impact on the economy.

Executive Global’s bespoke series of interviews on Productivity, Strategy, and Profitability. Javier Vande Steeg of Asset Preservation, Inc, discusses 1031 exchanges and tax mitigation strategy.

FINANCE U.S. recession and money creation 16 John Williams of ShadowStats gives his expert outlook on the economy and negative yields.

QE forever and a banana republic? 18 Bill Holter of JSMineset delivers his view on monetisation, negative rates and debt to GDP.

Banana republic monetary policy 22 Shannon Berkley looks at Quantitative Easing experiments and prospects for hyperinflation.

Harry S. Dent Jr. returns to give his expert analysis on demographics and the next crash.

Deutsche Bank’s dilemma

Shannon Berkley reports on the precarious nature of Deutsche Bank’s derivatives position.

Facilitating global trade

We sit down with Euro Exim Bank to discuss trade finance and corporate banking.

What every CEO needs to know 38 Robert Embers of Dionach discusses the importance of prioritising cybersecurity.

Maximising returns

Hanno Schoklitsch of Kaiserwetter Energy on IoT and cloud-based analytics technologies.

AmeriVet leads the way Distinguished Lieutenant Colonel Elton Johnson Jr. on the rise and rise of this veteran-led broker-dealer.

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CONTENTS

SUMMER 2019

EXECUTIVE GLOBAL

Yield curve inversion and rates

44 A series of advantages

Keith Weiner looks at the 10-year Treasury, falling interest rates and potential credit crises.

Tourism in Morocco

LEGAL & ADVOCACY Strategy & international tax

We sit down to talk all things taxation with Dr. K Olsen one of the world’s leading tax advisors.

Asset purchase prices

SOG Law provide their input on the Serbian Act on Protection of Competition.

Liechtenstein, safe and solid

• Productivity, Strategy, Profitability

Thomas Hughes looks at what it takes to thrive in a post-deflationary barter economy.

The petrodollar and global trade 64 Oliver Taylor looks at the future impact of a breakdown of the US petrodollar system.

EXECUTIVE EDUCATION The power of team coaching

Caroline Sheridan, CEO of Sheridan Resolutions Ltd, looks at effective team collaboration.

Executive leadership strategy

Oliver Taylor comments on effective leadership strategies.

Lingnan’s leading MBA program 70 Professor Lu Jun discusses the Lingnan MBA programme’s leading position in South China.

GEOPOLITICAL AFFAIRS

Lessons from Venezuela

Rachel Smith reports on this business-friendly country with a high standard of living.

Stefan Kremeth on why Liechtenstein is perfect for wealth and investment management.

Rachel Smith looks at the impact of the Brexit Party on the Premiership of Boris Johnson.

FDI & INWARD INVESTMENT Andorra’s investment appeal

Imad Barrakad explains why Morocco is such a popular destination for tourism.

Has Britain Already Left the EU? 50 The buck stops here Rachel Smith looks at why Britain may have actually already left the European Union.

Thomas Hughes looks at how San Marino has legitamised its stance on the global market.

A sustainable future

Andrew Main Wilson on entrepreneurship and the impact AI will have on productivity.

Network / Global / Accreditation Quality / Best Practice / Peer Review Impact / Awards

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EDITOR NOTE

Foreword

EXECUTIVE GLOBAL Editor’s Note

Breakout! A Golden Opportunity? Gold has broken through the $1,400 mark, ending what seemed an interminable spell as a backwoods bystander. Many market analysts are focused on the dollar’s performance, engrossed in depicting what the Fed’s recent announcement of pending rate cuts means for the US currency against the euro and yuan. Yet the reality has always been that in times of currency turmoil, gold has seen investors flock to its safe haven status. ow significant are recent upward moves by gold? In context, the current value represents gold’s highest price in around six years. Currency enthusiasm has been dampened noticeably by the Fed’s news, as well as the low-key (and sometimes somewhat dramatic) trade tussles between east and west. As if to confirm a pending gold boom, silver is also rising, indicating a renewed interest in precious metals overall. While gold typically gains value in a downturn, silver does not. The current rise in silver’s value, too, seems to indicate a large swathe of investors shedding currencies in favour of precious metals. Morgan Stanley, Credit Suisse and Société Générale are among players predicting a big finish for gold in 2019. There has been a swift move on Wall Street towards favouring gold, and this time it is less a quest for something to spark interest than a shift based on well-informed predictions of declining currency values. Specifically, analysts are predicting the dollar’s mildly shaky status to be nothing short of a correction, the end of the currency’s third notable rally since the 1970s. Moreover, commentators see more than a moment’s rally, and are predicting that the precious metal has now established a base from which it will continue to climb. With the dollar’s hegemony being challenged in a number of trading arenas — most notably by the Russian-Sino alliance, with Iran happily gearing up to trade oil in yuan — currency trading lines are becoming blurred. It is likely that gold’s rise will go almost hand-in-hand with the dollar’s decline. All needed ingredients are present: a stagnant recent history for gold, the dollar’s potential correction after decades of dominion, and importantly, the breaking of

executive global • Productivity, Strategy, Profitability

the psychological barrier of $1,350 per ounce. Analysts at Credit Suisse are already touting a potential return to the heady status gold attained when it traded at its record high of $1,921 years ago. While the euro and yuan bedevil currency traders’ surety around the dollar, gold is painting the backdrop against which it seems certain that some value may be lost in the US dollar from 2019 and 2021. Analysts are confident that gold has a lot more to gain in the coming weeks and months of 2019. The current rise in the precious metal has also brought home to many investors the importance of diversification, and many are jumping at the opportunity to get on board, anticipating even a shortterm spike. Precious metal commodities are often undervalued yet remain an essential component of a diversified strategy. The asset class has also always presented as one with a positive long term trend. Could now be the time to begin copying the smartest guys in the room and buy in? Having risen over 9% this month, gold could be on track for its greatest monthly performance since mid-2016. Executives as of 2019, must take note. EG

John Marshall John Marshall Editor-in-Chief, Executive Global

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FINANCE

ShadowStats

Photo: UPI / Alamy Stock Photo

U.S. Recession And Mounting Risks Of Unfettered Money Creation Intensifying Economic, Fiscal and Financial-Market Crises. As this article is put to bed in the first week of August 2019, the U.S. financial markets are in some turmoil, with the Federal Reserve under criticism for doing too little, too late in monetary accommodation in order to counter an unfolding recession in the United States.

Article by

John Williams

FOUNDER AND ECONOMIST, SHADOWSTATS.COM

hat circumstance has been exacerbated by an escalating trade war between the United States and China. At the same time, the U.S. Congress and the Trump Administration have agreed recently to explosive growth in U.S. federal spending and the budget deficit, until well after the November 2020 federal election. That means continued rapid and otherwise unsustainable growth in U.S. government debt, in conjunction with the U.S. federal debt ceiling having been waived. Together, recession, Federal Reserve actions and an exploding budget deficit sharply exacerbate the risks of massive U.S. dollar debasement by the Treasury and/or unfettered money creation by the Federal Reserve, ultimately collapsing the exchange rate value of the U.S. dollar and severely disrupting the global financial system, as we know it. Those factors are reviewed separately.

U.S. RECESSION AT HAND In the context of recent reporting and benchmark revisions, headline U.S. Gross Domestic Product has yet to show an inflation-adjusted current quarterly contraction, as of initial second-

â€˘ Productivity, Strategy, Profitability

FINANCE

ShadowStats quarter 2019 reporting. Nonetheless, economic and employment series tied to such industries as retail sales, industrial production and construction all have shown recession, along with a number of private indicators and surveys of business activity and consumer behaviour. The Federal Reserve triggered the current new recession, by too rapid a tightening of consumer liquidity and hiking of interest rates in the year or two coming into December 2018. Those Fed actions reflected the U.S. Central Bank’s efforts to escape the systemic costs of the Quantitative Easing (QE) used to bailout the failed domestic banking system in 2008. Subsequently, the Fed’s Open Market Committee (FOMC) cut its targeted interest rate by a quarter-point on July 31st, with more easing likely to follow, potentially including a new round of QE, providing expanded liquidity to the banking system. If QE is reintroduced, such likely will become a permanent feature of the U.S. banking system. Formal calling of the recession by the defining and deliberative National Bureau of Economic Research likely will not happen before late 2020, but its eventual calling should time the downturn from peak economic activity in November 2018. Accurate estimates of first-quarter 2019 GDP (presently showing annualised real growth of 3.1%) likely never will be seen, given data and survey disruptions from the partial shutdown of the U.S. Government, including key elements of the Commerce Department involved in tracking and reporting the economy. Yet, both secondand third-quarter 2019 GDP growth rates likely will show quarterly declines in their final reporting (initial second-quarter growth slowed to 2.1%). UPDATING U.S. TREASURIES’ NEGATIVE YIELD-CURVE ISSUES Discusse d pre viously in Executive Global Spring 2019[ Executive Global Spring 20191, “Yield Curve and Recession, Unfettered Money Creation and Hyperinflation”], “A confluence of unusual factors promises an unusually interesting year ahead for the U.S. economy, politics and financial markets....the [U.S.] economy appears headed into its first formal recession since the Great Recession, as signalled by an ‘inverted yield curve’ among other indicators...” “If you were to plot a graph of market yields on Treasury instruments against their maturities, from left to right, from shorter-term to longer-term, the plot of yields or the ‘yield curve’ normally would have a ‘positive’ or increasingly rising slope, from left-to-right, from shorter-term to longer-term maturity. That circumstance reflects yield risk perceptions in the markets, where generally longerterm investments command a higher return than www.executive-global.com

the shorter–term investments. With a pending recession, the risk shifts to the near term, with higher yields upfront and relatively lower yields in the longer term as flight capital seeks the longerterm rate stability...” In the first week of August 2019, not only was the U.S. yield curve sharply inverted, signalling market perceptions of imminent recession, but also there was talk in the credit markets of U.S. Treasury yields turning negative for the first time in U.S. history, as has been seen recently with some German and French bonds. Unless you are playing pricing games with bonds, where dropping yields boost prices, holding a bond at a negative yield makes no sense. Why not just hold cash, rather than be penalised financially for lending to the government? If your investment goal is safety, consider holding physical gold. A negative yield curve signals financial-market and economic dangers at hand, as certainly does the potential for negative yields. UPDATING CALLS FOR REVAMPING THE MONETARY SYSTEM Also discussed in the Spring 2019 issue: “with U.S. federal debt levels up against the debt ceiling [now suspended], a euphemistically entitled Modern Monetary Theory (MMT) has generated some political turmoil in Washington. Largely dismissed out of hand by mainstream economists and politicians, MMT offers a rapid downhill ride into a U.S. hyperinflation. In contrast, mainstream U.S. politicians already have the U.S. on a slower, albeit just as calamitous downhill ride into hyperinflation....” “MMT centers on the concept that a sovereign state, such as the United States, can print its money at will, no need to balance a budget or to sell bonds. The theory goes that the U.S. cannot default on debt denominated in its sovereign currency, the U.S. Dollar, since the U.S. simply can print any dollars needed to cover its obligations.” “Applied to the United States, the theory advocates that the government simply print whatever dollars it needs to provide a guaranteed minimum income and/or employment to the general population. There is no need to issue bonds. Should inflation pick up and become a problem, the U.S. government simply has to take excess cash out of the system to contain it, by raising taxes or then by selling bonds, per MMT.” In the existing circumstance, the U.S. government has no practical way of covering its current long-range obligations for Social Security and Medicare, other than having either an extra $80 trillion cash in hand, today, or by massively cutting future benefits and/or expanding mandatory Social Security and Medicare contributions. The first option is not possible; the second simply is not politically feasible. MMT effectively is non-accountable government money printing, which camouflages existing, dangerous and otherwise unsustainable economic policies, specifically having the same effect as the currently unconscionable monetisation of unsustainable federal debt, which promises eventual

1 Executive Global Spring 2019, “Yield Curve and Recession, Unfettered Money Creation and Hyperinflation”

systemic bankruptcy or the more likely event of full U.S. dollar debasement and hyperinflation. MMT simply is designed to accomplish unfettered government spending without constraint or accountability. The current system has some constraints placed on it by the financial markets, where funding is handled by the issuance of U.S. Treasury bonds, given some credence and discipline by the bond market and rating agencies. The open-ended MMT, however, is at the pleasure of the government, with no spending constraints on it other than its political needs. That explains why the MMT concept now is so popular among those hoping for massive expansion of new and existing government social programs. ”NO RISK OF UNITED STATES TREASURY SECURITIES DEFAULTING” Also previously discussed, the credit rating of U.S. Treasury securities was downgraded in 2011, by the Standard & Poor’s rating agency. “Then former Federal Reserve Chairman Alan Greenspan noted at the time that there was zero risk of the U.S. Treasury defaulting on its obligations. He noted that Treasury obligations were denominated in U.S. dollars, and that the U.S. always could print as many

UNLESS YOU ARE PLAYING PRICING GAMES WITH BONDS, WHERE DROPPING YIELDS BOOSTS PRICES, HOLDING A BOND AT A NEGATIVE YIELD MAKES NO SENSE.

dollars as it needed. [That comment appears to be the underlying concept that triggered the MMT school of thought.] Dr. Greenspan was correct, where unbridled printing of U.S. dollars would not be an event of default for Treasury securities, such likely would be considered an implicit default, likely triggering massive flight from the U.S. dollar. Nonetheless, such a circumstance would lead eventually to runaway domestic inflation and full debasement of the purchasing power of the U.S. dollar.” PROTECTION FOR INVESTORS Discussed regularly in these articles, the practical protection for investors in these extraordinarily volatile and dangerous times and financial markets, remains the investment in and holding of physical gold. EG

For further information, please visit: www.ShadowStats.com Summer 2019 •

FINANCE

JSMineset

Photo: ZUMA Press, Inc. / Alamy Stock Photo

Will QE Forever Create A Worldwide Banana Republic? We have finally arrived…not to a wonderful party or some exotic location, no, we have arrived financially and monetarily to the exact same position to where we were back in 2007-08. Back then, the Federal Reserve embarked on "easing" monetarily for the first time since the Dotcom bubble, today the Fed is easing for the first time since the Great Financial crisis with a caveat. Article by

Bill Holter PARTNER, JSMINESET

hat caveat being a system with more debt outstanding in both real and nominal terms versus any point in human history! No matter what debt ratio you look at, never has debt been a heavier weight around the global financial system and the real economy’s neck…the whole world with few exceptions is now a Banana Republic! As a background, we reached what I termed ”debt saturation” levels back in 2006. You could see it throughout the system. There were few left who could financially take on more debt while many who could, decided better not to. When the crisis broke, the only sector with the ability (and stupidity) to take on more debt in size were sovereign treasuries aided by the world’s central banks. Central banks responded by flooding the system with liquidity and

by funding sovereign treasuries’ deficit spending efforts to jumpstart the system. And here we are again with the exact same situation and problems… only far greater in magnitude! Globally, total debt is roughly $250 trillion while debt to GDP levels have surpassed 320% as of 2019. Using the U.S. as the example, it is important to understand the nuts and bolts behind total debt outstanding versus debt service payable. For round numbers, on books federal debt was roughly $10 trillion during the 2008 crisis and debt service hovered under $250 billion annually. Fast forward to 2016, total debt grew close to $20 trillion but debt service required was still in the $250 billion per annum range. In short, federal debt outstanding doubled while interest rates were cut in half. QE AND NEGATIVE RATES This is why interest expense had remained largely unchanged for several decades...interest rates have gone from double digits to nearly zero bound. The explosion of debt did not sting because the interest rates payable have collapsed. Now, just a few years later, the story has changed and debt service is about

• Productivity, Strategy, Profitability

to truly matter for two reasons. First, the amount of debt outstanding has grown in the last 10 years faster than interest rates were cut. Secondly, central bank rates approached the level of ”zero %”. Is zero the hard bottom for rates? In fact, central banks are now talking about official ”negative interest rates”. Negative rates are currently a reality as the world (led by Japan and Europe) has over $13 trillion worth of debt currently trading at negative rates. This is another topic altogether but suffice it to say, negative interest rates are a financial perversion that cannot exist in a real and stable financial system. It is akin to a snake eating its own tail. For purposes of this article, let’s focus on where it has and will lead to. The GFC occurred primarily because the world had reached debt saturation level. The crisis was treated with…more of what caused it. Central banks flooded the system with liquidity that was used to stabilise the financial system and of course the huge ramp up in further debt. Now, 10 years later, we are back to where we were in 2006, but with a real economy far smaller in relation to the debt. Now, central banks are firmly backed into a corner. They told us for years they could ”normalise”

FINANCE

JSMineset

both interest rates and their balance sheets. 20172018 showed us that neither rates nor balance sheet size have any hope of ever normalising. Q4 of 2018 illustrated exactly what will happen on the road to normalisation. Now we face another (mandatory) round of QE. Central banks are being forced to ease by lowering rates and providing more liquidity to placate financial markets from rebelling. As the late, great Richard Russell used to say, ”it is either inflate or die”. Inflate or implode is exactly where we are today because of the gross levels of debt outstanding. Just as with any Ponzi scheme, either new capital comes in or the scheme is finished. In central bank terms, either a new and continued source of credit comes to the rescue, or past debt outstanding is revealed as impaired. CROSSING THE DEBT TO GDP LINE If you understand the above, even only a little, then you must be wondering what it means? Or better yet, what it means to ”you”? It used to be in the old days, any nation that crossed the 100% debt to GDP line was considered as entering ”banana republic land”. This was so because at 100% debt to GDP, unless a nation had extreme outsized economic growth, they would soon find themselves with the difficulty of servicing their debt. The biggest problem with servicing debt came about as countries who borrowed in dollars had no ability to print dollars and devaluing their own currency to help trade would hurt their ability to repay the debt. Now that monetising has (temporarily) become acceptable, the 100% debt to GDP threshold has been thrown out and we find the entire world bloated with 320% debt to GDP. I mentioned ”the old days”, do you remember them? Back when borrowing money had a real interest rate associated with the note. Maybe six or seven percent? Maybe higher, 8-10%. What I’m getting at here is the crux of the problem and ”why” the problem comes to a head on this go ‘round. In order to accommodate the absurd levels of global debt at 320% of GDP, the only way to do it was to jam interest rates toward and even below zero. The central banks have termed what they have done, and now what again must be done, as quantitative easing or ”QE”. The reality is this, QE is a fancy and unthreatening name for what central banks have tried and failed for hundreds if not thousands of years ...”monetisation”. You can look the definition up in the dictionary but in essence, ”monetising” is simply creating new money out of thin air and generally used to fund the issuance of treasury debt. In every single instance throughout history where www.executive-global.com

a nation resorts to monetising debt, both the currency and the debt get watered down and diluted in value. In many cases where the monetisation is done on a large scale and long time, the currency and issued debt become devalued and ultimately worthless. Think the French Revolution, Weimar Germany, Zimbabwe, Soviet Union, Argentina or Venezuela. If one could print money or borrow their way to prosperity, poverty would not exist today and would have been eradicated hundreds of years ago. The fact is, if you have a pie and cut more and more slices, each new slice is smaller and smaller. The same is so for a currency. Each new unit digitally printed dilutes existing currency units.

IN CENTRAL BANK TERMS, EITHER A NEW AND CONTINUED SOURCE OF CREDIT COMES TO THE RESCUE, OR PAST DEBT OUSTANDING IS REVEALED AS IMPAIRED.

It should be noted that the early stages of monetisation does ”feel good”. This is because of the effects of the inflation created. Monetising devalues the currency and also past debt taken on. Devaluing makes past debt easier to service and ultimately easier to pay off but there is a flip side of the coin. One man’s

debt is another’s asset. A devaluation that makes debt easier to pay, also devalues the ”asset” held. Think banks, brokers, pension funds etc. who hold bonds in their portfolio, any currency devaluation also devalues bond holdings. If you understand nothing else about a currency devaluation, please understand that any and all ”savings” in the devalued currency loses value and thus purchasing power. THE DANGER OF MONETISATION To wrap this up, history has shown the best way to protect yourself and family against losing purchasing power of your savings is via ownership of both gold and silver. Gold and silver are real money that are not freely printable and most importantly not a liability of any manmade central bank or treasury. What I mean here is that gold and silver are proof of capital, labor, and equipment used to create the bar or coin. They do not promise anything and need no promise to have value. Currencies (debt) on the other hand are a liability of the issuer. For example, dollars are liabilities of the U.S. Fed, euros are liabilities of the ECB and yen are liabilities of the BOJ. The danger of course is what we spoke of above, these central banks are monetising (printing) new currency with abandon. Reckless monetary policy is exactly what we have witnessed since 2008 and it looks like global central banks are now on the verge of doubling down on lunacy. Gold has historically been THE best safe haven during times of financial distress and panic. In a grossly overleveraged world where nearly all assets have liability of one sort or another, capital will desperately seek the safe haven status of gold simply because it is no man’s liability! EG

For further information, please visit: www.jsemineset.com Summer 2019 •

PRODUCTIVITY STRATEGY PROFITABILITY

Asset Preservation, Inc

STRATEGY

Strategy and Asset Preservation Interview with

Javier Vande Steeg CEO ASSET PRESERVATION, INC

Our interview with JAVIER VANDE STEEG, CEO of Asset Preservation, Inc explores the inner workings of asset accumulation and wealth preservation strategies, with a focus on one of the premier IRC Section 1031 qualified intermediary firms in the United States. We catch up with this pioneering firm to discuss tax mitigation, asset and wealth preservation solutions for sophisticated and professional investors.

How may the API Advantage be beneficial to sophisticated and professional investors? The API Advantage is based on experience JVS and security. In API’s 30-year history we have facilitated a wide variety of complex transactions. API’s Commercial Division is a highly experienced and skilled group who work with high net worth investors, family offices and sophisticated corporate clients. EG

Why might it be a better investment decision to exchange rather than sell an investment property? The benefit of a successful exchange is that JVS you keep pre-tax dollars working for you, allowing full equity to be reinvested and leveraged into profitable assets. Selling and paying taxes results in less capital to invest to that of exchanging and reinvesting tax free. EG

When deployed correctly, how may the 1031 exchange actually guarantee wealth accumulation? Investors who sell real estate can pay up to JVS four different taxes: 1) depreciation recapture at 25%, 2) capital gains at 15-20% federal, 3) net investment income at 3.8%, and 4) when applicable, state taxes (which can be as high as 13%). While no one can say that a 1031 exchange “guarantees” wealth accumulation, I can say that properly executed exchanges defer, indefinitely, the aforementioned taxes on capital gain. EG

How may trusts be utilised in the estate planning process to effectively implement a 1031 exchange transaction? A trust, individual, or any entity can perform JVS a 1031 exchange. The key issue is that the tax owner who sells the investment property must be the same tax owner who acquires replacement investment property. EG

Where do you see the next big opportunities for wealth accumulation in the next 5-10 years and why? The 1031 exchange is the best vehicle to JVS preserve an investor’s equity and reinvest pretax dollars to grow their portfolio. While there are other ways to defer capital gains on the sale of investment property, none allow the continued control of assets like the 1031 exchange and the possibility of endless deferral. Are there any legislative or regulatory issues EG that may affect the strategy of investors that they should always remain aware of ? In the United States, government representatives JVS look at tax code provisions like 1031 exchanges to assess how this affects overall tax revenue collected. In 2017, Section 1031 was changed to be limited to real estate where it had previously been available to defer taxes on a wide variety of other assets. With this recent change, we don’t expect any further changes in Section 1031 for a while. 1031 exchanges have been a part of the tax code since 1921 and the government realises this tax code provision helps encourage investment in real estate.

• Productivity, Strategy, Profitability

How essential is the 1031 exchange as a core component of tax mitigation and wealth preservation strategy? The 1031 exchange is an essential tax driven JVS real estate transaction that is popular for obvious reasons. The majority of 1031 exchanges are the “delayed exchange” format, where the client has up to 180 days (beginning at the close of the relinquished property) to complete the exchange and acquire replacement property. There are two other exchange variations called “parking arrangements” that provide creativity and a “value add” when employed. Parking arrangements are used when the taxpayer needs to acquire the replacement property before selling their relinquished property, or when the desired replacement property needs substantial capital improvements. EG

You have several fantastic testimonials from clients. What kind of service can high net worth investors expect when working with Asset Preservation, Inc? API is extremely proud of its outstanding track JVS record over the past 30 years. We are sensitive to the needs of each client and work diligently to make sure each exchange is well qualified, documented and perfectly executed. We have a very experienced and well-trained staff that understands all aspects of the 1031 exchange rules and strive to deliver outstanding performance that exceeds our clients’ expectations. EG EG

For further information, please visit: https://apiexchange.com

Selling and paying taxes results in less capital to invest to that of exchanging and reinvesting tax free.

FINANCE

Monetary Policy

QE Forever And Banana Republic Monetary Policy What’s the difference between “polished” Western nations applying Quantitative Easing (QE) and a Banana Republic printing endless, worthless money? Credibility, it seems, that stems from GDP and reserves too, also differentiate nations in numbers. Yet defining the difference is an interesting and often alarming pursuit, so similar are aspects of QE and junk money, writes Shannon Berkley. hy shouldn’t the US or the UK go into terminal hyperinflation by enacting what are ostensibly collapsed state money printing measures? Led by the Federal Reserve, central banks worldwide have seemingly repeated what most would consider a recipe for disaster, were it applied to emerging markets. Of course, economists have long lists of differences between QE and the junk money induced by hyperinflation. Money engineering can be very similar to money printing, however, and there is only so much financial engineering that even giants like America can get away with before the veneer starts to thin. The similarity in approach between QE and a classic worthless currency story presents as far more disconcerting than the lengthy technical details usually mustered to explain the differences. Unlike dated historical hyperinflation episodes, much has also changed politically (and commercially) over the last two decades. China has become the manufacturing arm of the globe, with a growing economy that dwarfs almost all others. There is an ongoing commitment to dismantle existing petrodollar arrangements and allegiances, confirmed during a recent meeting of the Russian and Chinese heads of state. The old, clear lines between weak and strong (and their currencies) have forever blurred. There are also shifting and solidifying political alliances from the Middle East to Asia, that present the first real challenge to Western hegemony since the First World War. These modern realities serve to accentuate the need for answers to the simple

question: how can the QE nations get away with so blithely ensuring money supply as a response to financial woes? Historically, any country that abused its printing press paid dearly in currency value, ultimately resulting in a wholly collapsed economy. MONEY PRINTING HYPERINFLATION: A CASE STUDY Arguably the most analysed hyperinflation episode to date occurred in Germany early in the 20th century. The victor nations of WWI decided to assess Germany for their costs in waging war against the belligerent German nation. With no means of paying in gold, or currency backed by reserves, Germany ran the presses, causing the value of the mark to collapse. The Weimar Republic printed the papiermark in volume to address the post war debt, as its only means of payment. Very quickly, between 1921 and 1923, hyperinflation consumed the German republic’s currency, making the papiermark essentially worthless. The social fallout included unheard of hardships in the country for the general populace, as well as considerable internal political instability. It led to the occupation of the Ruhr region by France and Belgium, as well as the overall loss of any kind of fair-trade options for the bruised nation. At the end of 1923, it took 1 trillion papiermarks to buy a single goldmark. Between 1914 and the end of 1923, the German papiermark’s rate of exchange against the US dollar plummeted from 4.2 mark/dollar to 4.2 trillion mark/dollar. The price of one gold mark (0.35842g gold

• Productivity, Strategy, Profitability

weight) in German paper currency at the end of 1918 was two paper marks, but by the end of 1919, a gold mark already cost 10 paper marks. This inflation worsened between 1920 and 1922, as it rapidly degenerated into hyperinflation. The cost of a goldmark (or conversely, the devaluation of the papiermark) rose from 15 to 1,282 papiermark. In 1923, the value of the papiermark had its worst decline. By July, the cost of a goldmark had risen to 101,112 papiermark, and by September the rate sat at a whopping 13 million papiermark

HISTORICALLY, ANY COUNTRY THAT ABUSED ITS PRINTING PRESS PAID DEARLY IN CURRENCY VALUE, ULTIMATELY RESULTING IN A WHOLLY COLLAPSE ECONOMY.

FINANCE

Monetary Policy and the IMF is on record as predicting an inflation rate in the millions of percent for Venezuela in 2019.

Photo: zefart / Shutterstock.com

for a single goldmark. In just another two months, on 30th November 1923, it cost 1 trillion papiermark to buy a single goldmark. To go from one hundred thousand to one trillion units in two months, Germany experienced a 29,500 percent hyperinflation during October 1923. This extrapolates into roughly 21 percent interest per day. Bizarre scenarios of buying bread in the morning and being unable to afford it in the afternoon were commonplace in German households. The repercussions of this bottomless free-fall of commercial conventions were virtually identical to later snapshots of hyperinflation. Historically, this extreme one-month inflation rate has since only been exceeded three times: in Hungary, at 41.9 quadrillion percent (207 percent per day) in July 1946; Yugoslavia at 313 million percent (64.6 percent per day) in January 1994; and Zimbabwe, at 79.6 billion percent (98 percent per day) in November 2008. Previously Argentina, and modern Venezuela, have also depicted the insane ravages of hyperinflation. MODERN REENACTMENTS OF HYPERINFLATION The Germany that became the bedevilled Weimar Republic had been bombed into hyperinflation. It lost the war and its credibility, www.executive-global.com

its ability to dictate its affairs conventionally. It is not only military conflict that cultivates the right conditions for hyperinflation, however. Failed political cohesion and/or internal policies have since in practice far exceeded the tragedy of the Weimar Republic’s war-induced hyperinflation. The need for a national currency and blunt attempts to ensure circulation of viable money, for example, led to 1940s Hungary being the worst case of hyperinflation on record. To be fair, external aggressors of WW2 had decimated Hungary’s economy. But as per the modern QE notion of ensuring money supply, the Hungarian government of the time subsequently turned the country’s economy to ashes by copiously printing money. On the cusp of hyperinflation, in June 1944, the Hungarian pengo had dipped to 33 units against the US dollar. By June 1946, one US dollar cost 460 trillion, trillion pengo. At the time, the regime quite literally ran out of decent quality paper with which to print bank notes. Even more recently, Venezuela’s economy is still battling the ravages of hyperinflation. Again, the inevitable comeuppance for turning to the mint, millions of Venezuelans currently cannot afford basic necessities such as food and toiletries. Prices are effectively doubling with each passing month,

YET MONEY SUPPLY IS STILL BEING ENGINEERED With a further round of QE currently on the agenda, why has QE not simply tumbled the playing economies into hyperinflation? Firstly, some of the essential differences between QE and Banana Republic knee-jerk currency printing are valid. Indeed, some economists point out the although pushing liquidity into the markets, the Fed, for one, is actually not printing money per se, but simply enacting a “fiscal transfer.” The Fed pays interest on owned money; money it has a monopoly to issue. In this closed circle, hyperinflation is theoretically stymied. Secondly, with QE, the Fed can be said to be simply altering the composition of public financial assets, and/or their duration. In this economic exercise, no “new” money is printed as a final solution to cash flow and economic stability. While this is all good and well, the one thing central banks can never truly control is market sentiment. Should the integrity of bonds and currencies become suspect, perhaps due to the unavoidable dilemma around raising interest rates beyond nominal terms, for example, public confidence and participation in the machinations could fail, sparking an economic implosion. Accounting is a two-tier system with a precarious balance. In the eventual reshuffle to return to a “normal” market economy, sentiment may sour and serious corrections could occur, bringing the prospects of hyperinflation dangerously closer. Modern Monetary Theory (MMT) predicted the avoidance of hyperinflation under QE, dealing as it does with the subtleties of a fiat economy. Interest rate and term adjustments as well as other fiddling to maintain an economy, leave out the vagaries of what many consider the principal driver of a currency’s value, however, namely sentiment. QE has largely been a smooth if sometimes obnoxious exercise, largely because of the authoritative stance of the US Reserve and the measured pace of application. Very importantly, too, a prime reason for QE not having induced ghastly inflation to date is that economies were already deflationary as QE was initially enacted. No matter how sophisticated, the fact remains that central bank interference in remedying commercial woes is fundamentally dangerous. As soon as a currency’s value is freed of determination by a free market system and engineered by the authorities, it becomes something else. No matter the euphemisms for ‘Quantitative Easing,’ money printing is money printing, and history has proven these policies to lead to desperate economic turmoil. Nothing builds genuine economic prosperity like confidence. And nothing builds national confidence (positive sentiment) like a free, operationally strong currency. The “emergency measure” of QE contaminates all of that. The proof will come in its ending, when in theory QE must die, as the emergency has passed. That is when the true nature of the romance between QE and hyperinflation will be seen. EG Summer 2019 •

CEOPROFILE

Rino Solberg Chairman and CEO, Better Globe Group

ETHICAL FORESTRY INVESTING Our interview on Ethical Forestry Investing with RINO SOLBERG, Chief Executive Officer of Better Globe Group, explores the tremendous contribution of one of Europe’s leading sustainable forestry firms behind the ethical initiatives that are changing the lives of millions for the better. Executive Global sit down with the renowned speaker, bestselling author, and prolific entrepreneur masterminding the operation that simultaneously provides a healthy return for investors while eradicating poverty in Africa. You have been a successful entrepreneur for many years. What makes social entrepreneurship different? There is not that much of a difference RS between regular entrepreneurship and Social entrepreneurship. Both businesses are based on making a profit, but social entrepreneurship makes the profit for the “cost of operation”, meaning that instead of making money for the shareholders, it is given to whatever the cost of running the business is. In my own case for example, our vision is; “to eradicate poverty and corruption in Africa” so instead of trying to increase our own profit, we can as an example pay a poor farmer 10% more than the market price for their trees, as long as we can afford it. EG

• Productivity, Strategy, Profitability

Better Globe Group has a wonderful number of testimonials from the positive contribution you have made to communities. What have the challenges been in gaining a foothold for tree planting in these markets? That has been the easy part, as tree planting RS is wanted everywhere in Africa. In Kenya, the government is desperate to get the tree coverage up to 10% by 2023, which is an optimistic goal and they need all the help they can get. Also, in Uganda where we are planting trees, we are very well received. Throughout most of Africa, illegal logging is taking place and trees are being cut faster than anyone can plant trees enough to match it, so Better Globe Forestry is not having any challenges in gaining a foothold for planting trees. EG

CEOPROFILE

Rino Solberg Chairman and CEO, Better Globe Group

There is not that much of a difference between regular entrepreneurship and Social entrepreneurship. www.executive-global.com

Summer 2019 â€˘

CEOPROFILE

Rino Solberg Chairman and CEO, Better Globe Group

Be a person known for your integrity, as you always need trust from other people. Always under promise and over deliver, and keep your word, regardless. CV RINO SOLBERG COUNTRY OF BIRTH Norway ALMA MATER NKI EXPERIENCE 5 years in the Airforce 10 years running an electric appliance shop Thereafter, 40 years as a serial entrepreneur internationally 1963 Grenadier in the Airforce 1968 Running an electric appliance shop 1974 Production and selling of UNISLIP grinding machines in 20 countries 1974 Motivational speaker, trainer and author of 12 books on personal development 1987 Training of companies to be certified to ISO 9000 standard quality systems 1991 Founded Child Africa (NGO) 2004 Founded Better Globe Group

EXECUTIVE RECOMMENDATIONS

» PRODUCTIVITY

Have every person do their job right, the first time and every time.

» STRATEGY

Plan your work, THEN work your plan.

» PROFITABILITY

Chose a business with low supply and high demand and you will always make good profit.

How important is the strategic collaboration between private sector entities and government agencies in reaching the 10% tree cover target in line with the goals of Vision 2030? It is very important, because without private RS sector collaboration there is no way the governments in Africa will reach their targets. Most problems in Africa are due to lack of business approach to solving poverty issues, because charity has never changed anything and will not change anything in Africa. That is why I am personally against charity as a way of solving problems, except for help during catastrophes and disasters. All other developments must be based on business principles of sustainability. When government and the private sector comes together and base development on business principles, the countries are beneficiaries of lasting developments, which will eradicate poverty over time. EG

How important is Microfinance in the whole equation of eradicating poverty? Microfinance is mostly a way to kickstart RS entrepreneurship, whether it is a poor farmer who needs help to get his farm going, or finance for a sawing machine, in order to make some extra income for the household. However, there are also other aspects with microfinance, like learning how to plan for the future through borrowing money, paying it back and learning how to save money by having a savings account. All these factors are important for the eradication of poverty. But maybe the most important factor in the microfinance process is that poor people keep their dignity and pride, as they are working themselves out of poverty in a sustainable manner. EG

What strategies do you deploy to ensure the maximum yield and a healthy return for sustainable forestry investors? As most other forestry companies are “just RS foresters,” they are happy when their trees grow and when the trees are fully grown, they hope that the market price for timber is good. This is however not always the case, because it depends on the paper and building industries, which are subject to volatility. The leadership of Better Globe Forestry are mainly businesspeople and we see timber as “raw material,” which must be processed, in order to make a good profit. This is one of the biggest reasons for Africa being the poorest continent today, because they have been exploited by people from all over the world for over a hundred years, who took all their raw material and processed it elsewhere. Better Globe Forestry has the

• Productivity, Strategy, Profitability

vision to eradicate poverty in Africa and therefore we have to process all our timber into exportable products like furniture and floor tiles, to mention a few, in order to build employment for Africans and keep the profit in Africa. You are also a renowned public speaker, giving Tedx talks on eradicating poverty. In what ways does Better Globe Group yield better results than other charities? First, let me make one thing very clear, Better RS Globe Forestry is NOT a charity it is a company, BUT it is run as a “Social Entrepreneurship” company, meaning that the AIM of the company is to do good with the profit. The reason being is that any real growth should be self-sustained. Better Globe Group has taken on several areas of sustainability in their business processes. First, massive tree planting, as the business model for making a profit for all parties involved, from the one financing the tree from the outset, to the people planting them and all in between. Tree planting is also good for the local environment as well as for fighting global warming. On top of that, we do the processing of the timber and own all the processes of every step all the way to the customer, which ensures that we will remain with majority of the profit. Secondly, Better Globe Group helps families sustain themselves by providing micro loans and teaching them how to save money. Thirdly, Better Globe Group is supporting children through our nonprofit organisation Child Africa, with schools and education, as well as teaching “Honesty and integrity” in order to fight corruption for the long term. When you put all the above factors together, then we will not only yield better results than any charity, but it will also be sustainable, which is NOT the case in any charity. EG

What can entrepreneurs learn from your bestselling book Social Entrepreneurship - The Better Globe Way? Well, we have spent 15 years in order to find RS out how to do it, and make all parts work well together, and to prove that my ideas from the book worked. I guess that the main “recipe” from the book tells the reader what we think is the best way of eradicating poverty and corruption in Africa and that we mean it is possible to do this, BUT only through social entrepreneurship. The book describes “The Better Globe Way” of social entrepreneurship, but there are many other ways to do this too. EG

CEOPROFILE

Rino Solberg Chairman and CEO, Better Globe Group

Tell us more about Child Africa and your philanthropic endeavours in the educational sector? Unless children get education, no country will RS ever get out of poverty. Also, if corruption is going to be eradicated, only the children can do this, as the corrupt people today will not change. By building the character strong from early childhood, the children can be taught not to accept corruption when they grow up. Child Africa, which was started by my wife Julie and me in 1991, has been testing this theory for many years and we know that it works well. Our aim there is to make the children “Champions of Integrity” to fight corruption long term. EG

What do you see on the horizon within the next 5 years for Better Globe Group? The next 5 years, we will be the world’s biggest RS tree planting company of mahogany trees. We will operate these 5 sales companies, which will finance the planting of 9 billion trees the next 25 years; betterglobe.com, trees4shopping.com, trees4realestate. com, trees4cars.com and trees4family.com EG

EXECUTIVE SNAPSHOT Rino Solberg has also been well known in Norway for over 35 years as one of the most dynamic motivational speakers and for giving more than 1,000 seminars and training courses to over 120,000 people in the area of Sales, Motivation, Communication, Leadership, ISO 9000 and Total Quality Management.

ACCOMPLISHMENTS

» Got patent in 12 countries on a “Grinding Machine for Gate valves” – “UNISLIP”

» Build multi-national company Unislip AS in 13 years, with subsidiary companies in Norway, USA, UK, Germany and Japan and with agents in 20 countries. (70-80% of all nuclear power stations have Unislip today).

» Started the NGO Child Africa in 1991, together with my wife Julie Solberg.

» Trained approx. 150 companies to get

certification to ISO 9000 series quality standards.

» Written 12 books and given over 1000

seminars on Leadership, Quality, Sales and Motivation.

» Started Better Globe Forestry in 2004 at 60

years, and will continue until I am 100 years old.

www.executive-global.com

You have been called the ‘Green Messiah of Africa’ with Better Globe Forestry being named one of the 20 Most Admired Companies in 2018. What is the secret to your success in business? I do not think there is a “secret” to success RS in any business, they are all well-known factors. But here are some of these factors to success, which are also mine; find something that you love to do, or you are good at, as it will generate energy for you. Give 100% focus over a long period. Do not start a business just to make money, as you will probably never be able to focus, because there will always be something else that looks easier, quicker and better to distract you. Try to do something for others, the “work” then becomes a highly rewarding hobby. Be a person known for your integrity, as you always need trust from other people. Always, under promise and over deliver, and keep your word, regardless. Last, but not least, find good people with the above criteria to work with, you cannot make it alone. EG EG

What advice do you have for sophisticated and professional investors who may be considering sustainable forestry as an asset class? It is important to understand that “Sustainable RS forestry” and “Sustainable forestry” are two different things, depending on what and how things are done. As an example, you might get sustainable forestry by planting Eucalyptus and pine trees in Africa, but in many African countries there is not a good market for these trees, hence not much profit. On the other side, when like Better Globe Forestry, is planting high quality mahogany trees with a huge market internationally and a plan to process the timber into products, hence good profit, which makes it sustainable too. EG

How do you envision your contribution to EG ethical forestry and sustainable investments eventually “Making Africa Great Again?’’ It is actually our three-pronged approach of; RS 1. Massive tree planting, 2. Microfinance and 3. Children’s education, that gives the maximum synergy that will “Make Africa Great again.” However, I will only be able to build a strong foundation myself and probably not live to see my vision come to fruition.

For further information, please visit: http://www.betterglobegroup.com

ABOUT RINO SOLBERG Rino Solberg is a renowned Norwegian businessman and inventor with patents in 12 countries. After building the multinational company Unislip in 13 years, with subsidiary companies in USA, Japan and Germany and representatives in over 20 countries, he sold the firm to retire early and dedicate his time to writing, personal development, and philanthropic endeavours.

Summer 2019 •

FINANCE

Pento Portfolio Strategies

Asset Price Bubbles & Even More Quantitative Easing? Following World War II, the Bretton Woods agreement of 1944 set up a new monetary system for the world. The USD would be linked to gold, and the rest of the developed world would join their currencies to the dollar. This system set forth the value of the dollar to be exchanged for gold at $35 an ounce. But, as the Johnson administration experimented with out of control spending on war and welfare programs, the world began to lose faith in the intrinsic value of the dollar in its translation to gold. Article by

Michael Pento CEO, PENTO PORTFOLIO STRATEGIES

earing a complete run on US gold reserves, in 1971 the Nixon administration closed the gold window – severing the exchange of dollars for gold by foreign governments. From this point on, the USD had completely cut its tether to gold, releasing the worldwide monetary system free from any limitations of base money growth. Money was no longer pegged to the increase in the mine supply of gold; it could now become Fiat-based; decreed by the government with no intrinsic value. And the world entered into its doomed experiment with global fiat currencies and began its journey down the road to financial entropy. Governments would eventually take their license to print money on demand to extents unimagined at the time. We now have a progressive march towards the state of perpetual zero percent interest rate policies throughout the world with the added measure of QE thrown in for additional emphasis. The 1987 stock market crash established for the first time that the Fed was not only the arbiter of employment and inflation in the economy but was also the stealth-sponsor of Wall Street and the stock market. By late August of 1987, stock markets rose an astonishing 44%. But by mid-October, the federal government disclosed a larger-than-expected trade deficit leading the dollar to fall, interest rates to spike and markets to unravel. By the end of trading on Friday, October 16th the Dow Jones Industrial Average (DJIA) sank 4.6%. On the following Monday morning, investors in the US awoke to

stock markets in and around Asia in free fall. This led the DJIA to plunge 508 points or 22.6% in one-day. Fed Chairman Alan Greenspan came to the rescue assuring markets his Fed would serve as a source of liquidity. The DJIA gained back 288 points in just two trading sessions. Back in 1987, the entire market value of equities made up just 66% of the economy. And Household Net Worth as a percent of GDP was 370% This rescue of the market would later be referred to as the “Greenspan put.” And it ushered in a new era of central banking where higher asset prices have become the true mandate of the Federal Reserve. Fast forward to the Asian Contagion and the Russian Debt Crisis. A crisis that began in Thailand in late ‘96 and early ‘97, and quickly spread to Indonesia, the Philippines, and South Korea and the market feared default.

FROM THIS POINT ON, THE USD HAD COMPLETELY CUT ITS TETHER TO GOLD, RELEASING THE WORLDWIDE MONETARY SYSTEM FREE FROM ANY LIMITATIONS OF BASE MONEY GROWTH.

But as with many things in an ever-connected world, this was a problem not just limited to Asia but infected the global economy—and the seeds for the next crisis had sown. Between February 1998 through August of that year, financial markets were

• Productivity, Strategy, Profitability

risk-on. The spread, which is the additional amount of interest emerging-market countries or junk-bond issuers had to pay to sell their debt, was very small in relation to U.S. Then in August of 1998, Russia surprised the world by defaulting on its debt and massively devaluing its currency. All the investors who had been piling into risk assets panicked. This panic left many large hedge funds on the wrong side of the trade but no more so than legendary hedge fund Long Term Capital Management [LTCM] that found themselves on the wrong side of almost every trade and in a highly leveraged way. MISALLOCATIONS OF CAPITAL LTCM had its tentacles in every major Wall Street firm. And not surprisingly, the Fed came to the rescue. Federal Reserve Bank of New York President William McDonough orchestrated a 15-bank bailout of LTCM. The Fed then once again lowered the fed funds rate, reassuring investors they would do whatever was needed to support the U.S. stock market. This is why QE and Zero Interest Rate Policies on the part of central banks have now become permanent fixtures. In every new crisis, the Fed has encountered since the 1987 crash, they have upped the ante on intervention. In a free-market dynamic, a credit crunch leads to rising interest rates. Those higher rates would normally have cut off access to the cheap credit that keeps non-viable businesses afloat. Recessions

FINANCE

Pento Portfolio Strategies

Photo: orhan akkurt / Shutterstock.com

are healthy in that they purge the economy of its malinvestments. However, by its systemic practice of artificially suppressing interest rates with increasing distortions, central banks have created massive misallocations of capital that have produced unprecedented levels of debt and asset bubbles. THE IMPACT OF ZIRP AND QE And for Central banks around the world, the problem is worse. The Bank of Japan has barely dared to hint about ending QE, and the ECB dabbled in ending QE, but it is now promising to get back in that dangerous game. Here in the US, the Fed was able to get to 2.5% on the overnight lending rate, but Jerome Powell has recently averred that the Fed could to return to the zero-bound rate. And the markets are praying that this will happen soon. But every iteration of ZIRP and QE expands the gap between the rich and poor. Wall Street is the primary beneficiary of the new money created because it inflates asset prices. Yet, the middle class gets burned with higher food and energy costs and potential first-time homebuyers that can’t afford to make the purchase. And they are expressing their frustration through Brexit, the Yellow Vests in France and the worldwide populist movement. This frustration can be seen in the below charts, which demonstrate how far asset prices have grown above the real economy. Of course, this wealth is concentrated in those who own a disproportionate share of stocks, bonds and real estate. www.executive-global.com

But in addition to crushing the middle class, all this money printing also leads to an inexorable increase in debt levels and asset bubbles. Today’s version of insolvent NASDAQ startups and defaulting Liar Loans can be found in the corporate bond market, which is the nucleus of the current enormous pile of zombified debt (companies that need to issue new debt just to pay interest on existing obligations). Nearly one-quarter of the companies in the Russell 2000 have now found themselves in this precarious position—praying that junk bond yields don’t rise and that the economy never slows down. There is about $5.4 trillion worth of Leveraged Loans and corporate debt that is rated BBB or less. Compare that to the relatively minuscule amount of $1.5 trillion of subprime mortgage debt that eventually brought the entire global financial system to its knees. Like the prior two bubbles, companies have used much of this new debt in a non-productive manner. Specifically, to buy back their shares and pay special dividends, both of which have inflated stock prices to a record high as a percentage of the inflated GDP figure. MODELLING THE BUSINESS CYCLE These bubbles are the product of artificially-low interest rates that engendered yet more debt to be incurred, which in turn served to push asset prices much higher than what the underlying economic activity can maintain. The global economy is slowing down, and the

current fixed income bubble is beginning to crack. But this occurrence is not primarily caused by tariffs and the threat of escalating trade wars. The real reason for the faltering global GDP is the record $250 trillion worldwide debt that is encumbering growth and imposing a gigantic tax on future consumption with interest due. Add to this, the inability of China, which has been responsible for 1/3 of global growth since 2008, to continue manipulating the global economy higher through further increases in unproductive debt issuance. And, the lagged effects of 9 rate hikes from the Fed, along with the unprecedented destruction of $600 billion of base money supply through its QT program. These factors will eventually send a dagger straight at the heart of the junk bond and equity markets; causing GDP to contract sharply; thus exposing the insolvent nature of much of this debt. Central bankers will only then be able to recognise that those bubbles existed in hindsight. But for most investors, it will be far too late. Passive investment management works very well, while the bubble is inflating. But it will not when the cycle turns because nearly everyone is mindlessly piled into the same buy and hold strategies that hold much of the same securities. Accurately modelling the business cycle has become crucial to avoid the third massive collapse of equity prices since the year 2000. EG

For further information, please visit: www.pentoport.com Summer 2019 •

FINANCE

O’ Connor Portfolio Management, LLC

It Comes Down to Just 2 Things Considering there are hundreds of thousands of Financial Advisors in the world, just how does one go about deciding which one to hire? Article by

Article by

CEO O’CONNOR PORTFOLIO MANAGEMENT, LLC

HEAD TRADER, ASSISTANT PORTFOLIO MANAGER, O’CONNOR PORTFOLIO MANAGEMENT, LLC

Catherine O’ Connor

he obvious answer is...the one that will make you the most money with the least risk. How can you decide that? What are the questions you should ask to determine which advisor has the knowledge and capability to actually grow and compound your money? How do you choose an advisor who will make you feel ”safe” in unstable, risky markets? I have worked in the financial services industry for 27 years, and believe it comes down to just (2) things; read on. Let me make it simple and uncomplicated for you. (1) Is the Portfolio Manager or Financial Advisor willing and able to act in your best interest? Willingness is determined by integrity; they either have it or they don’t. Do you sense that you are important to them? Do you feel that they care about you and your money? Do they appear to be honest? Are they consistent in their approach to managing your money?

PRODUCTS FOR GROWTH By able, I mean will the broker-dealer they are employed by, permit them to sell you what is best suited for you? Or, does the advisor have to choose among the investments that the broker-dealer has made financial sharing agreements with, or the broker’s own proprietary products? Is the advisor compensated by commissions or fees? When commissions are involved, the Financial Advisor could be swayed to recommend the product that pays the most commission instead of the investment best suited for your needs. If the firm uses fees for compensation as a percentage of your assets they manage, then their fees are tied to performance. If the fees are tied to performance, that is really good for you. It means that when the money manager makes your money appreciate, he/ she gets paid more; if your assets depreciate, he/she gets paid less. We believe fees tied to performance are

Jeffrey Dolgos

the best way of compensating your financial advisor, and it is the only way we do business. (2) Do they actually manage your money or just gather a person’s assets and turn the management over to a separate entity or product? The Wall Street business model for Financial Advisors is to gather the assets and send them out for separate management. This business model is used because many advisors have a degree in something other than finance, and may or may not be qualified to manage your money. Additionally, by delegating money management to a separate entity, the business can be scaled up faster and more efficiently. What happens is the advisor becomes focused on increasing assets under management by selling to new clients. The usual result is that not enough attention is paid to the old clients. The client’s money may or may not be invested efficiently because the investment strategy should have been changed and it wasn’t because the advisor was focused on getting new clients. You will have to search diligently to find a firm that done not operate this way. At O’ Connor Portfolio Management, we don’t use mutual funds, index funds, annuities, or any Wall Street product because they are bundled. Mixing “bad” investments with “good” ones, drags down the investment return. Instead, we sell the inferior investments quarterly, making room for new superior investments to grow and compound. This is a thoughtful, planned approach to making the most of your money; over time your portfolio may get stronger. When you invest in ”products”, your money is lumped together with everyone else’s money. The assets we manage are not all in the same “pile”; each person has their own separate portfolio. Assets lumped together cannot compound properly due to the fact that people enter markets at different times. Person #1 invests in January; person #2 invests

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in November. Person #2 usually has to pay the same capital gains per share as person #1, even though their investment may not even have profits yet, due to commissions paid. This is a common problem with mutual funds; paying taxes on money you never earned, and being surprised at income tax time. We’ve been discussing products for growth, now let us review products for income. Here is Head Trader and Assistant Portfolio Manager, Jeffrey Dolgos’s view on Bond Mutual Funds. BOND TRADING AND YIELDS When I worked on the municipal bond trading desk of a large national brokerage firm, we used to get calls from the retail Financial Advisors with relative frequency that went something like this: “I am looking at XYZ bond mutual fund and they are quoting a yield of 5.25%, while the highest yield I am seeing in your individual bond inventory is 4.00%. Why in the world would I buy one of your individual bonds versus the bond mutual fund?” Like I tell my daughter all the time, if you have a question in class you need to ask it, because I can guarantee you that others have the same question. I gave the Financial Advisors a lot of credit, because they called and asked. Many others probably had the same question but didn’t ask…they bought the bond fund, not the individual bond, based on the higher yield they

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O’ Connor Portfolio Management, LLC

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FOR INVESTORS THAT HAVE SUBSTANTIAL ASSETS, BOND MUTUAL FUNDS ARE NOT SOMETHING WE WOULD THINK ABOUT BUYING; THE PERFORMANCE JUST ISN’T THERE AND THERE IS RISK...

were quoted. That 5.25% yield quoted by the mutual fund department is a factual number, but it is not the number you should be looking for as an investor. There are a number of yields in fixed income investments, and the seemingly too-good-to-be-true number usually is just that. What they are quoting is the “distribution yield”, or trailing twelve month yield (TTM). This TTM yield can contain many things…. typically it is annual interest earned, but sometimes there are special dividends and capital gains included, which can boost the number. “Current yield” is similar; it is simply the coupon rate divided by the price of the bond. A 6% coupon bond trading www.executive-global.com

at a price of 115 gives you a 5.22% current yield. This only tells you what you are receiving on an annual basis considering current price, not face value, which is what you will receive upon maturity. A more accurate measure of your potential return on a bond fund investment is the “SEC yield”. This is a complex calculation that tries to incorporate the actual yields to call or yields to maturity. It is mandated by the U.S. Securities and Exchange Commission and approximates the yield an investor would receive over a yearly period. TWO FUNDAMENTAL QUESTIONS Bond mutual funds serve a purpose in the investing world, but I feel their role is limited. For a beginning investor there are low barriers to entry; you can start with hundreds, not thousands of dollars. For example, municipal bonds trade in minimum multiples of $5,000, and even this is considered an “odd lot”. $10,000 and more will get you a better buy price and a better sell price should you need to liquidate before maturity. For investors that have substantial assets, bond mutual funds are not something we would think about buying; the performance just isn’t there and there is risk... I am talking about principal risk; the risk that your investment is worth less than you started with. Bonds in a managed portfolio product are bought and sold with varying frequency depending on the

goals of the manager. What this means is that the fund as a whole never matures, as does an individual bond. The share price will fluctuate as bonds of different prices are bought and sold, and in theory, an investor exiting the fund may never be able to recoup their original investment due to a drop in the share price. In contrast, while an individual bond will fluctuate in value over its lifetime, upon maturity you will receive face value or 100 cents on the dollar. Principal risk also exists with respect to interest rates. While all fixed income investments are subject to fluctuations in value as interest rates rise and fall, individual bonds will pay 100 cents on the dollar upon maturity (barring a sovereign or company bankruptcy) no matter how high interest rates go. In contrast, a bond mutual fund’s share price may never fully recover before the investor liquidates it. When you think about ‘which financial advisor should I hire?’ or ‘how does my wealth manager compare in results?’, remember to ask 2 questions.... 1. Do they act in my best interest like they care about me? 2. Are they actually managing my money, or do I just have ”products” managed by somebody else? EG

For more information, please visit: www.OConnorPortfolioManagement.com Summer 2019 •

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Economy and Markets

Final Trump bubble sees Dow 33,000/Nasdaq 10,000, then biggest crash since 1929 - 1932 My research over the last 30 years started with breakthrough concepts in demographics wherein I could project major booms and busts around very predictable generational spending trends, i.e., demographics. In the late 1980s I was able to simultaneously predict the long-term crash of Japan and the great U.S. and global boom of the 1990s and beyond.

Article by

Harry S. Dent Jr. AUTHOR & EDITOR, ECONOMY AND MARKETS

hat breakthrough included the impact of young new generations entering the workforce on inflation that explained why we had the highest inflation in modern history into 1980, and falling inflation ever since, despite massive growth and monetary stimulus after the Baby Boom had fully entered the workforce and then became very productive. But when the economy surprised economists by tanking in 2008, right after my predicted peak in Baby Boom spending, there was a new game in town. Central banks simply printed unprecedented amounts of money to offset the natural decline and prevent a major breakdown in the financial system similar to the early 1930s that was clearly in motion in 2008 and early 2009. Here’s my chart that moves forward the immigration-adjusted birth index in the U.S. for the peak in spending of the average household that was age 46 for the Boomers and 47 thus far for the Millennials. What a correlation until QE (quantitative easing).

CHART: QE CREATES FRANKENSTEIN: “MARKETS ON CRACK” The U.S. stock market is now about 120% overvalued vs. the natural trends that my breakthrough indicator in 1988 has been so good at

predicting. That difference can be explained largely by one simple set of facts. Since 2009 earnings per share of the S&P 500 have grown 119% faster than actual total profits have. What has caused that? Stock buybacks. The slowest growth recovery ever, plus ultra-low short and longterm interest rates from central banks buying their own bonds, has made it easy for companies to buyback their own stocks cheaply, and/or divert profits that are not needed to expand capacity after over-investing in the great boom and such slow growth to follow. So, they just buy back their stocks with the near-free money and tax cuts. That reduces shares dramatically and that’s what has caused earnings per share to be so out-of-step with the economy. And just how much money did central banks print? $13 trillion and still rising thus far. The Federal Reserve printed twice as much as a percentage of GDP than they did to fight the Great Depression in the 1930s. But after a bit of tightening in recent years, its balance sheet of government and mortgage bonds is only 19% of GDP. In Europe, that ratio is 40% and in Japan it is a whopping 101%. We’re the best house in a bad neighbourhood of desperately printing money to stave off a debt bubble and nasty deleveraging like the 1930s. That’s why the dollar has held up best and will more so in the next crisis. But we were the ones that added major corporate tax reductions from Trump – and that’s why our stock markets have made new highs since early 2018 and Europe and Japan have not. And what has been the result of all of this massive money printing: an economy almost exactly like the 1930s depression – or what I call the winter

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season. Cumulative real GDP from the top in 2007 through 2018, has been only 19%. In the same 11year time period from 1929 to 1940, it was actually slightly higher at 20% - both the worst periods in U.S. history. The difference is that in the 1930s we had a major stock crash and 25% unemployment depression with massive business and bank failures upfront in the early 1930s, with an aftershock and mini-depression between 1937 and 1942. THE GREATEST BUBBLE IN HISTORY This time around we have had the smaller shock and mini-depression upfront in 2008/2009 as QE

WE’RE THE BEST HOUSE IN A BAD NEIGHBOURHOOD OF DESPERATELY PRINTING MONEY TO STAVE OFF A DEBT BUBBLE AND NASTY DELVERAGING LIKE THE 1930S.

allowed the worst of the financial crisis and debt deleveraging to be kicked down the road – to what I forecast as between 2020 and 2023, right on a 90-year

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Economy and Markets Photo: Witthaya lOvE / Shutterstock.com

lag to the Great Depression from 1930 – 1933. In recent years I added a very clear 45-year technology cycle for surges in productivity and profits that has a larger impact every two cycles. Steamships and railroads built on each other for a revolution in global transportation. Computers and the internet built on electricity, appliances and the automobile. This 90-year anniversary to the 1929 – 1932 crash may be the most important single cycle hitting in our lifetimes. Massive QE has extended the Baby Boom growth cycle and bubble from late 2007 into late 2019. The four key cycles I track and reveal in my latest book, Zero Hour, are at their worst between 2020 and 2023 before turning up again longer term. The greatest bubbles and bursts since the Industrial revolution super-charged our modern economies beyond anything seen in history since the late 1700s – when free market capitalism first combined with democracy, the ultimate play of dynamic opposites. Those super-bubbles peaked in 1837, crashing into 1842 and peaking in 1929, crashing into 1932. Those two bottoms were exactly 90 years apart. I see this stock bubble peaking likely in early 2020 or so and bottoming at levels no one expects around late 2022, with the economy following to its lows in 2023- similar to the lows in unemployment in 1933. A crash in 2020 would impact the 2020 election big-time – favouring the democrats (who need a lot of help after the two recent debates). One of the things I have had to study intensively in the last several years has been bubbles. Bubble periods are rare and occur every other generation in what I call the fall bubble boom season. These periods see the greatest mainstream advances in www.executive-global.com

technologies, a generational boom and falling inflation. That’s when bubbles occur. The entire boom of the last Bob Hope generation from 1942 – 1968 did not see bubbles and the worst corrections before the peak were 20% -- not 50% plus. I have been on a very unrewarding campaign in recent years to remind people that we are not just in a “bubble,” but the greatest bubble in modern history that is the most global and comprehensive. It has included real estate and commodities, and the commodity bubble has already burst near the scale that I predict that bubbles do: 50%+ in real estate and 80%+ in stocks and commodities. When economists and pundits constantly come out and say “we’re not in a bubble because…” I bring out this chart. CHART: THIS IS NOT A BUBBLE? THE GREATEST CRASH SINCE 1929 – 32 AHEAD In this fall bubble boom season (now extended into the winter season of 2008 – 2023) we have seen four bubbles. A small one of 111% from 1984 – 1987 with a 40% crash to quickly follow. Then the largest since 1925 – 1929 into early 2000 with 223% gains in the Dow and 530% in the Nasdaq. It crashed 78% for tech stocks and 39% for the broad market. Then we saw a minor bubble into the peak of demographic trends in late 2007 -with 97% gains and a 54% crash. Note that the new trend since 1995 is higher highs and higher lows! But look at the bubble since QE that I highlighted in the first chart as being 120% overvalued from the most fundamental trends. It’s

a whopping 325% recently and 410% projected as I am expecting it to go as high as 33,000 on the Dow and 10,000 by early 2020 or so on the Nasdaq by current market patterns. What is the downside of this greatest bubble of all time? At a minimum we should retest the lows of 2009 of 6,500. From a Dow of 33,000 projected, that would be an 80% crash. My best projection is a new low on a trend line through the bottoms since 2002. That would be about 5,000 by 2022. That would be an 85% crash. For the Nasdaq I project as low as 1,100 from a 10,000 top ahead. That would be an 89% crash, just like 1929 – 1932 in the Dow. The good news is that this would end the winter season and be followed by rapid debt deleveraging and direly needed financial reforms – not more endless stimulus at ever higher levels – like a drug addict taking more to keep from coming down off their high. And where do we go from there? A very different global boom from 1983 to now – in the next global boom from 2023 – 2036/7. Emerging countries will dominate as developed continue to predictably age and slow. Asia will dominate as it has since China’s debut in the mid-1980s. But China will be slow to recover from the most over-built economy in history at first and India and Southeast Asia will take the lead. Commodities will see another glorious boom and bubble into around 2038+ driven by the higher spending on such basics in emerging countries. That is a subject for another article and for my next book in early 2020. EG

For further information, please visit: www.economyandmarkets.com Summer 2019 •

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Commercial Banking

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The most dangerous bank in the world? Deutsche Bank’s Dilemma New York-based Lehman Brothers became the largest bankruptcy filing in United States history in 2008. Sucked into the subprime mortgage crisis and blinded by greed, the bank became the poster child for the financial collapse that tainted both sides of the Atlantic. Lehman Brothers held around $600 billion in assets at the time. Rather tellingly for the layman, it appeared as though a few key players were folding on the home front, yet the interwoven nature of global banking was also laid bare for a moment in time, says Shannon Berkley. he domino effect of big names collapsing in the US clearly depicted just how incestuous banking had become. Deutsche Bank, one of the largest in the world, would make Lehman Brothers look like a training day, were it to collapse. It’s no overstatement to say that every financial institution is on some level connected to Deutsche Bank. Its $1.1 trillion in outstanding leveraged loans grew in 2018 by over 20 percent, with the total leveraged loan markets having doubled since 2008. After six weeks of high-level negotiations, April 2019 saw the abandonment of plans for a merger with Commerzbank, something the German government was supporting. The deal failed, as both banks said they couldn’t justify the risk and restructuring costs. The benefits were too little for the emergence of one giant German super-bank. The government owns a 15 percent stake in Commerzbank, a hangover of QE measures prompted by the mid-2000s financial meltdown. In a very real sense, Deutsche Bank really is the most dangerous bank in the world. Few institutions have the ability to affect almost every global citizen were they to go under. Right at the top of the list right now, sits Deutsche Bank.

THE HIGH-RISK DERIVATIVES ‘’TIME BOMB’’ Investor Warren Buffett once famously labelled derivatives “financial weapons of mass destruction.” In May of 2018, the Pope himself spoke out against derivatives, tying the instruments into gambling and sinful behaviour. The Vatican labelled derivatives as “a ticking time bomb.” Indeed, while traditionally employed by companies to lower their operational risks, that’s about the only good thing one can say

about derivatives. Very interestingly, Deutsche Bank had planned to set up a €50 billion “bad bank” to hold tens of billions of assets — comprised mainly of derivatives — had the merger with Commerzbank been successful. A derivative is essentially a financial contract, which gleans its value from an underlying asset. Derivative buyers agree to purchase the asset at a predetermined price on a specific future date. Typically employed with commodities like gold, oil and petrol, derivative contracts are now commonplace in the currency asset class — typically centred on the US dollar — as well as stocks, bonds, and even interest rates. Since the derivatives contract seller doesn’t actually need to own the underlying asset, derivatives are a lot easier to sell and churn. The year 2017 saw some 25 billion derivative contracts traded. The Eurozone and North America also saw heightened derivative interest rate trading on a rate upswing. Simultaneously, a Chinese decrease in commodities futures saw a downswing for Asia overall, yet such trading still totalled around $570 trillion — a staggering figure. Staggering, because of the blithe speculation and ease that accompanies derivative contracts. Hedge funds and other investors trade the majority of derivatives contracts, as they seek to up margins or gain more leverage. Derivatives demand but a fractional down payment, termed “paying on margin.” A great many derivatives contracts end up either liquidated or offset by another derivative contract prior to maturity. A huge swathe of traders are seen as unconcerned with settling the derivative contract were the market to move against them. If they score, however, they take profit and repeat. A massive, constant derivatives churn happens each trading day. For many retail investors, the notion of

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Commercial Banking “trading” in big deal commodities is a lure they cannot resist, and the possible global ramifications aren’t even considered noteworthy. For many trading firms, passing along value and debt in equal measure makes sense for their churn-stroketurnover. It’s no wonder even religious leaders look at the entire mess and urge restraint. DEUTSCHE’S DERIVATIVES PILE Companies legitimately employ derivative contracts to predetermine a commodity’s price down the road. Derivatives contracts will also hedge them against dips in future interest or exchange rates, as well as making future cash flow easier to calculate. Derivatives have however become akin to a dry, grassy playground in which children are juggling fire-sticks. In the hands of traders, it all looks like loads of fun, as long as everyone keeps playing the game. On the downside, if anyone drops a burning baton, the world catches alight. As Deutsche Bank is sitting on a $47 trillion derivatives book, were it to drop its baton, more than the local playground would burn. Described by some commentators as “behaving like a bad mine stock,” Deutsche Bank shares are dark horses in the market right now. Although the German government likely has other more legitimate reasons to have supported the merger with Commerzbank, it no doubt also has a wary eye on its shareholding. Although couched in big business jargon, the rationale behind Deutsche Bank’s quest for merger appears to be stigmatised. A major player in a $1.5 quadrillion global derivatives market, the bank’s fortunes have become their own source of speculation. It is already accepted wisdom that a financial collapse is coming, and that it’s merely to what extent players like Deutsche Bank cease their avarice (and deal in real-value assets) that will mitigate the fall. Based on figures alone, a Deutsche Bank default would make the Lehman Brothers episode laughable. BASEL III IS TIGHTENING THE NOOSE Having built a ghostly pile out of derivatives, Deutsche Bank is on the wrong side of dark mutterings in the market. The closest thing to a Ponzi/pyramid scheme one can encounter while still in legal markets, derivatives could unbundle one of the largest money circuses of all time if they were to collapse. As long as Peter continues to pay Paul, and Paul in turn signs up again with Peter, the derivative markets hold. When financial institutions like Deutsche Bank sit on such a massive percentage of that market, it becomes an outrageous yet true statement that a single company’s business acumen could make or break millions of people across the world. In an alarming realisation, the system rests precariously on a shaking house of cards. In the advent of a global financial collapse, precious metals typically lure investors as a safe haven. Gold particularly has a negative correlation to the stock market. This means that it traditionally www.executive-global.com

enjoys most-favoured status during crashes, although silver tends to fare less fantastically. Were the derivatives market to trigger a collapse, precious metals are likely to experience an upsurge as investors run for safety. Deutsche faces other challenges beyond market sentiment. The recent Basel III legislative amendments demand higher liquidity and more stringent operational requirements for banks. Indeed, spurred by their consumer protection ethos, regulators might very well inadvertently prove to be the match that lights the bonfire. The uneasy observation of financial institutions by global legislators has turned to action on numerous occasions over the last decade. Crypto regulation was where regulators were most recently seen to be addressing consumer interests, bringing digital currency trading into some kind of conventional order. There has been a slower yet more persistent move, too, and this against previous untouchables like

IN ANOTHER POSSIBLE SNAPSHOT OF RECKLESS TRADERS BEING PROPPED UP WITH TAX MONEY, DEUTSCHE IN FREE-FALL WOULD DEMAND MASSIVE INTERVENTION.

Deutsche Bank. 21st century regulators appear to have realised that they cannot presume the ethics of financial institutions. Driven by public furore and their inherent mandate of public protection, financial regulators are currently watching Deutsche Bank closely. THE MOST DANGEROUS BANK IN THE WORLD, OFFICIALLY Labelled by the IMF as “the most systemically dangerous bank in the world” in 2016, it is widely recognised that if Deutsche’s share price dips below $6.40, on paper, the bank will be out of business. If it fails and brings traders down with it, it is very likely that alongside financial hardships, German citizens may end up footing the bill to revive it. In another possible snapshot of reckless traders being propped up with tax money, Deutsche in free-fall would demand massive intervention. The bank’s current share price is $6.78 — less than 40c away from a global meltdown. Because of the huge inter-connectivity between banks and other financial institutions, a closed sign at Deutsche Bank has the potential to ruin global financial markets on a scale hitherto unimagined. The longer-term answer is, of course, to severely limit the potential for such derivative stockpiling in the first place. Perhaps Deutsche Bank will need to suffer the ignominy of becoming the institution that fundamentally changes how traders are allowed to spin such giant webs of eventual collapse in the future. EG Summer 2019 •

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Euro Exim Bank Ltd

Facilitating Globe Trade We sat down with Euro Exim Bank Limited, an award-winning institution headquartered in St Lucia that offers trade-related banking services and financial instruments designed to facilitate global trade flows. We chart the progress of one of Europe’s pre-eminent institutions that is revolutionising the world of trade finance and corporate banking for institutional and corporate clients. In what ways does Euro Exim Bank assist small to medium enterprises who may wish to enter into lucrative new markets?

not be adversely affected, as long as there is cost effective access to finance and proximity of trading partners.

Our specialisation is assisting corporates, offering fast creation of instruments, appropriate collateral requirements and comprehensive compliance allowing them to compete with unmatched rates and low liquidity impact.

What future prospects do you see for cryptocurrencies as a way of facilitating international payments for banking institutions? We see significant growth in crypto coins and GB fintech companies with optimised processes, competitive money transfers and low-cost alternatives to conventional correspondent banking, led by Ripple as market leaders. However, whilst not all economies embrace cryptocurrency, some countries are looking to alleviate dollar dependency, using cryptocurrencies as viable alternatives to fiat currency, allowing them to access financing for transactions currently under strict embargo. Once the hype has subsided, regulatory requirements addressed, trust issues and consumer protection legislation ratified, use of cryptocurrency will be as ubiquitous as use of mainstream fiat currencies today.

What advantages may RippleNet and XRP present to the processes of banking institutions with mass adoption? Prefunding fiat currencies is costly and GB burdensome in de-risked jurisdictions. Ripple is key to enabling secure real-time payments through interconnected ledgers, reducing cross-border transaction processing times, for fiat and non-fiat currency, specifically its XRP digital asset. Immediate client benefits are fast, guaranteed, immutable, frictionless flows, with efficient 3rd-party liquidity provisioning , without the need for costly correspondent relationships. EG

Tell us more about the Euro Exim Foundation and your philanthropic endeavours? Our CSR policy is about making a difference GB for underprivileg e d , disable d and disadvantaged communities, and the environment, with fundraising events raising thousands of pounds benefitting causes at home and abroad. EG

What impact do you think that recent Basel III requirements will have on the velocity of global trade flows? Under the leverage ratio regulation, as banks GB only need to hold 5 times less capital for trade instruments compared to more volatile instruments in capital markets the velocity of trade flows should EG

Are there any key challenges that may be presented with the greater adoption of distributed ledger technologies in banking? Not so much challenge as opportunity. DLT GB can reduce time on processing documents and data, providing immutability, negating database and golden record corruption, accelerating trustworthiness, auditability, and accessibility to all transaction elements. DLT is a systems efficiency enabler, recognised as an integral part of financial institutions’ technology and operational infrastructure, providing the trusted architecture as standard for application delivery as the electricity that runs the computer on which it resides.

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What opportunities do you see for banking the unbanked in Africa and the Far East? Immense. Whilst issues of dependency on cash GB and delivery of services to over 3 billion adults currently unbanked remain, new technologies are changing the payment landscape. Driven by increased acceptance and trust in digital and mobile platforms and applications encouraging financial inclusion and Ripple enabled real-time payments and currency transactions, the tools are available now to elevate Africa and the Far East to be empowered global market players. Market leaders of tomorrow will be institutions able to scale operations with 5G networks better serving low value high volume transactions, with the ‘value-add’ of simpler transfers, cheaper savings and pensions products, for regular transactions and also safeguarding and promoting long term financial welfare. EG

Are there any particular strategies Euro Exim Bank may deploy to stay abreast of new technologies in banking within the next 5-10 years? We are building on our RippleNet usage and GB continue digitalising our trade processes to be future-ready. And, we are extending our simplified blockchain enabled client on-boarding and information sharing, providing interoperable immutable, guaranteed, rapid data flows, for seamless trade ecosystem efficiency. As a specialist provider, we also plan geographic expansion, card issuance offerings and development of mobile trade finance applications standing ready to meet the challenges and opportunities as the trade arena evolves. EG EG

For further information, please visit: www.euroeximbank.com

Prefunding fiat currencies is costly and burdensome in de-risked jurisdictions.

www.executive-global.com

Summer 2019 â€˘

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Dionach

What Every CEO Needs to Know About Cybersecurity Threats and Attacks Cyber-crime effects every industry worldwide and cyber-attacks cost companies billions of dollars each year. Major corporations like Equifax and British Airways, the healthcare giant Quest Diagnostics and even the City of Baltimore, have all been targets of cyber-attacks. Article by

Rob Embers CHIEF COMMERCIAL OFFICER, DIONACH

ndividuals have become desensitised to the constant press coverage because there is widespread acknowledgment that cyber-attacks pose one of the greatest threats to our global economy. It is important not to become complacent and recognise that any company is at risk. Businesses can no longer fail to recognise the real threat of cyber-crime and need to understand the cost for adequate cybersecurity protection. Why are so many companies resistant to taking a proactive approach to understanding the risks and vulnerabilities associated with an attack? The answer lies in a combination of factors, but ultimately, understanding the origins and motives of these attacks will provide a strong foundation to ask the right questions and plan accordingly. Cyber threats originate from a variety of internal and external sources. Internally, a company’s employee may click a link that inadvertently gives access to the network via phishing. Externally, an attack may be a cybercriminal who has acquired network access through outdated software and can bring down the network or extract and sell their client’s data. When assessing the risks to

the informational assets of a company, there is no way to determine which method of attack is the most likely, but as precaution, companies need to understand the value of their informational assets to cybercriminals. Of course, companies that handle credit card payments represent a high-value target, but cybercriminals value other informational assets that companies may not have considered, including any personal data. Looking at an attack via phishing, the result of installing unauthorised software to a user device may go completely unnoticed, providing easy access for an attack. Alternatively, a large-scale Ransomware attack like the WannaCry attack in 2017, disabled thousands of operating systems because they were outdated, unpatched, and simply could not protect against WannaCry. Regardless of how an attack originates, or if it is targeted at a single company or at millions, it is vital to be prepared for all scenarios. The first step in cyber defence is developing a robust strategy to assess and manage a company’s risk. APPLYING CIA PRINCIPLES The hallmark of a successful CEO is the ability to build a dynamic leadership team that challenges the status quo and is not afraid to pose difficult questions. When it comes to cybersecurity, the base of all strategies is to question everything. Business technology has evolved immensely over the last 20 years and being reliant on an IT team combined with an array of hardware to provide adequate security is

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no longer an effective strategy. It is understandable why companies struggle to identify risk because traditionally, a CEO will ask the IT team if the company is secure, and typically the IT will answer, yes, which they believe is accurate based on their experience. There is a tremendous difference between someone in an IT department and someone qualified as a security expert, and understanding this evolution is critical. In today’s complex technological landscape, no company is secure and identifying vulnerabilities requires expanding the scope. The most important role in protecting against an attack is the role of Chief Information Security Officer (CISO), who will be the link between the business and technology. Like all C-Level roles the CISO role is challenging because they are operating in the ever-changing technological environment and while facing growing security threats. The CISO develops and executes the strategy and is most effective when equipped with competent staff, sufficient budget, and clear timelines to implement effective security controls. The most effective strategy only works when it’s driven from the top down and with the collaborative support of the CEO, CIO and CISO assessing risk and implementing a strategy. As a comparison, if a company received an audit identifying financial irregularities and then realised that their financial records were mishandled and incorrect, this would lead to the CEO ultimately being responsible for any penalties. Similarly, in the wake of a cyber-attack,

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Dionach

depth to the applications associated with payment processes. Combining this strategy, along with the CIA principles, should help prevent suffering the consequences of a breach. However, as a company acquires new data, new clients, and new staff, the risk to those assets need to be constantly evaluated as an integral part of an incident response plan.

the CEO would also be held accountable for the damage inflicted by the attack on the company and its negligence. While both scenarios will result in a loss of clients and severely harm the company’s reputation, the investigation and remediation costs will also be significant, possibly resulting in legal action. Not asking the right questions, relying on

BUSINESSES CAN NO LONGER FAIL TO RECOGNISE THE REAL THREAT OF CYBER-CRIME AND NEED TO UNDERSTAND THE COST FOR ADEQUATE CYBERSECURITY PROTECTION.

outdated technology, and believing a company’s officers are not liable for a cybercriminal’s actions is the wrong the way to face cybersecurity. A strong cybersecurity strategy should be centred around 3 principles: confidentiality, integrity and availability (CIA). The informational assets of a www.executive-global.com

company should not only remain confidential, but they should also not be accessible by anyone unauthorised, either internally or externally. This may sound obvious, but when looking at system-wide applications or internal software, ultimately, most employees can access data beyond their departments. Additionally, the integrity of that information should prevent any changes from unauthorised users. For example, an organisation which relies on an application to make time-critical financial decisions, should prevent changes in that code which may affect the application. Whether these changes go unnoticed is irrelevant if they ultimately cripple the operations of the application. Furthermore, if company information is confidential and retains its integrity, in a ransomware attack, the information is inaccessible because company systems are inoperable. Information is often the most valuable asset of a company, and on that basis, risks to informational assets need to be viewed as important as any other threat to the operations of a company. Applying the principles of CIA work best when the strengths and weaknesses of informational assets are identified. The systems that a company relies on for daily operations need to be the most secure and should be assessed on a regular basis; these systems are the focus of a defence-in-depth strategy. Identifying a company’s informational assets is the cornerstone to creating a strategy of defence-in-depth. For example, a company who relies on web sales for the majority of their business needs to apply defence-in-

A ROBUST CYBER DEFENCE STRATEGY A cybersecurity incident response plan will evaluate informational assets and systems which are most critical to operations and ensure they would still be accessible after a breach. Meaning backups can be restored and the information lost is kept to an absolute minimum because of these advanced simulations. Testing an incident response plan needs to be completed regularly, as does running tabletop exercises; ultimately, pushing the limits of any technology team will determine an incident response’s true effectiveness. Creating the ability to identify and react to an attack before it happens will make all the difference in the true cost of a breach. Equifax may have believed they had the necessary defences and response plans in place but are now being subjected to USD$700 million fine as a result of their 2017 breach, affecting over 148 million individuals. Cybersecurity is an investment because it a critical business tool. Ultimately, there is no way to provide complete security and no product, at any cost which will provide total protection against an attack. The best cyber strategy has a multi-faceted approach. Even the largest banks in the world rely on third parties for both protection and independent assurance of their technical vulnerabilities. Feedback from outside experts contribute to a greater level of security and allow companies to make continual improvements over time. There are too many examples of companies being crippled by their systems being unavailable or their informational assets being held by ransom. Simulating a crisis situation is an important element of cyber defence and should provide assurance that the most vital systems can be retrieved easily after a cyber-attack. Ensuring that your cyber defence strategy works is paramount to the successful operation of a company. PRIORITISING CYBERSECURITY In the future, cyber-attacks will increase in regularity and in impact, as will the costs and penalties associated with being an attack victim. The news of a cyber-attack is not as impactful because it is hard to visualise, and even though this is a widespread problem, companies do not see how their informational assets are under threat. There is not a one-size-fits-all solution to preventing cyber-attacks; attacks are complex by nature and threats grow and evolve just like any other industry. With a complex strategy and capable team, cybersecurity should enable a company to operate and grow with control and be safeguarded in an attack. Cybersecurity has not always been a top priority for companies, but by understanding the scope and scale of the damages, any CEO should be motivated to take major action. EG

For further information, please visit: www.dionach.com Summer 2019 •

FINANCE

Kaiserwetter Energy Asset Management GmbH

Data Analytics as a Service: Maximising returns and minimising risk within renewable energy Renewable energy has become the best alternative to the high cost of nuclear energy in the face of decarbonisation. The cost of producing renewable energy is already lower than that of fossil fuels, making it the cheapest source of electricity according to the latest findings by the IRENA report. Article by

Hanno Schoklitsch CEO & FOUNDER, KAISERWETTER ENERGY ASSET MANAGEMENT

nvestment in renewables surpassed investment in conventional fired power stations by far in 2018. According to data from BloombergNEF published in the Global State of Renewables Report 2019, investment in renewable energy reached $288.9 billion last year. However, total investment was 11% lower than in the year 2017, partly due to the collapse of the Chinese market, which has reduced its aid policy in the sector. Kaiserwetter is aware of the challenges that lie ahead in 2020 forcing investment into renewable energy. Furthermore, IoT and AI are becoming the key factors to achieving more efficient management and unprecedented investment returns, which subsequently will attract more investors to the renewable energy market.

HIGHLY EFFICIENT TECHNOLOGY Kaiserwetter, as an IntelliTech company, uses data intelligence to deliver Data Analytics as a Service (DAaaS) to maximise the return on investment and minimise investment risk. These digital services combining the opportunities offered by the Internet of Things (IoT) alongside with Smart Data Analytics, Predictive Analytics and Artificial Intelligence. Kaiserwetter´s product suite shows digital innovations such as ARISTOTELES, IRIS and ZULU. The cloud-based IoT Platform ARISTOTELES offers digital solutions for the technical and financial management of renewable energy assets. Thanks to Kaiserwetter´s IoT Platform, portfolio managers are able to achieve the integrated analysis of the efficiency data and financial information of energy plants. It ensures power production is operating at levels of highest performance and provides access to timely and reliable information on the project’s rate of return. In short: greater transparency, minimised investment risk and maximum return. Additional IRIS has been launched, the first

Photo: Elnur / Shutterstock.com

HOWEVER, TOTAL INVESTMENT WAS 11% LOWER THAN IN THE YEAR 2017, PARTLY DUE TO THE COLLAPSE OF THE CHINESE MARKET, WHICH HAS REDUCED ITS AID POLICY...

technological “Spin-off ” from ARISTOTELES. IRIS represents a milestone in the sector, as it offers extremely quick and in-depth examination of the status and potential of wind turbines with a scope that encompasses the whole wind farm,

• Productivity, Strategy, Profitability

in record time. IRIS is available to investors, asset owners, suppliers, rating agencies and mergers and acquisitions advisers around the world thanks to its effective computing power. IOT AND CLOUD-BASED ANALYTICS To make renewable energy generation more competitive, efficient and cheaper, Kaiserwetter has developed ZULU, the world’s first online service configurator for renewable farms. It allows each manager to determine the services they need and select online the lowest annual technical and financial management costs for wind and solar parks, with around 50% reduction in operational expenditures. By leveraging IoT and cloud-based analytics to increase efficiency, Kaiserwetter is leading the race to make the future brighter, allowing renewable energy expansion on a large scale getting closer to achieve the Paris climate goals. EG

For further information, please visit: https://en.kaiserwetter.energy

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FINANCE

AmeriVet Securities, Inc

Photo: Amnaj Khetsamtip / Shutterstock.com

AmeriVet Leads the Way Currently celebrating its 25th year in operation, Amerivet Securities, Inc. (“AVI”), is one of the oldest and most distinguished Service Disabled Veteran Owned Business (SDVOB) broker-dealers in existence (AVI has won numerous corporate business awards). Article by

Lieutenant Colonel Elton Johnson Jr. CEO, AMERIVET SECURITIES INC

nitially owned and operated by disabled US veterans, all of whom were former US Army paratroopers with military backgrounds in special operations (i.e., US Army Special Forces), Amerivet Securities, Inc., is one of only several FINRA member firms that is certified as both Service Disabled Veteran owned and operated and Minority owned and operated. The business mix of Amerivet Securities, Inc., is institutional financial services which it provides to a broad spectrum of institutional corporate and public clients. The firm’s expertise is in the areas of debt capital markets, equity capital markets, public finance, loan sales, cash management and investment banking. The Amerivet team has experts in each of these areas, many of whom are US military veterans.

HIGHLY DISTINGUISHED The Chief Executive Officer (CEO) and majority shareholder of Amerivet is Elton Johnson, Jr. He is a Lieutenant Colonel in the U.S. Army Retired Reserves, a disabled veteran, and a combat veteran having served two combat tours in Iraq and one in Afghanistan. He is a recipient of the Bronze Star Medal and the US Army Combat Action Badge. He currently holds the following FINRA Series licenses:

3, 4, 7, 14, 24, 27, 30, 52, 53, 57, 63, 65, 79 and 99. Of its many accomplishments in the financial services industry, two are most memorable. Amerivet was the first FINRA member since World War II to operate under war time conditions due to the active military duty status of its CEO during the Global War on Terror (Elton Johnson, Jr., was deployed seven times over a 12-year period). Amerivet was also involved in the MRAP program via its Registered Investment Advisory Department. Amerivet functioned as the financial advisor/consultant on the capital raise for Force Protection, Inc., which brought the company out of insolvency thus allowing it to proceed with the development and production of its Mine-Resistant Ambush Protected (MRAP) vehicles. Since being fielded, MRAP vehicles have saved the lives of thousands of US military personnel. A LEADER IN THE SECURITIES INDUSTRY In keeping with its motto: “Amerivet leads the way!”, the Amerivet team prides itself on being the leader in the securities industry in veteran engagement (i.e., the providing of a variety of services to veterans). This “core mission” of the company is accomplished by our continuous, diligent, and energetic efforts to connect veterans to all the resources available to them while, at the same time, helping organisations, especially Veteran Service Organizations (VSOs), connect to the veteran community. The Amerivet team also places a very strong emphasis on the hiring of veterans. The company’s efforts in the hiring of veterans has been recognised by Amerivet Securities, Inc., being the

• Productivity, Strategy, Profitability

first FINRA member to receive the prestigious US Department of Labor (DOL), HIRE Vets Medallion Award. The HIRE (Honoring Investments in Recruiting and Employing ) Vets Medallion Award Program was established as the only federal government program to recognise employer efforts in recruiting, employing, and retaining veterans.

AMERIVET WAS THE FIRST FINRA MEMBER SINCE WORLD WAR II TO OPERATE UNDER WAR TIME CONDITIONS DUE TO THE ACTIVE MILITARY DUTY STATUS OF ITS CEO...

In closing , regarding service, expertise, and leadership, Amerivet Securities, Inc., has established itself, by far, as one of the best Diversity/Inclusion (D/I) broker-dealers in the US securities industry. EG

For further information, please visit: www.amerivetsecurities.com

“Institutional Broker-Dealer Owned and Operated by Disabled U.S. Military Veterans”

AmeriVet Securities, Inc. AmeriVet Securities, Inc., provides institutional financial services to a broad spectrum of institutional corporate and public clients. As part of our showcase of a selection of this year’s Financial Elite Award winners.

• Service • Expertise • Leadership

Contact Details: Company: AmeriVet Securities, Inc. Name: Elton Johnson, Jr. Address: 1155 Avenue of the Americas, 14th Floor, New York, New York 10036 Telephone Number: (646) 809-6940 Web Address: http://amerivetsecurities.com

FINANCE

Monetary Metals

Yield Curve Inversion and Falling Interest Rates The yield curve has been inverted, for a few months now. Normally, the interest rate on longer maturities is greater than on shorter. This is to compensate the investor for the extra risks, including liquidity. However, rates can invert. For example, since May 23, the yield on the 10-year Treasury has been less than the 3-month. This is indicated in the graph, courtesy of the St. Louis Federal Reserve.

Article by

Keith Weiner

CEO, MONETARY METALS

any analysts call this a recession signal, and statistics show a correlation. For example, the Bank for International Settlements published data estimating the probability of recession based on the current degree of inversion to be about 33%. However, it’s hard to know if today is similar to the past, and hence if the statistic really applies. The Fed Funds Rate is dictated by the Federal Reserve, as it attempts to follow whatever monetary policy is in vogue at the moment. And arbitragers move the short end of the yield curve such as the 3-month. But the 10-year Treasury rate is set by buyers and sellers. Since 1981, this rate has been falling (with many zigs and zags).

A CRISIS OF CREDIT When the Fed pushes up the short end of the yield curve, but the market is pulling down the long end, the yield curve inverts. This hurts the banks. Their borrowing cost is determined by the short end of the curve, but their revenues are determined by the long end. Inversion squeezes their profit margins. So they’re reluctant to lend. Our economy depends on the smooth creation of credit, and a bank pullback can cause recession. The above is a pretty standard analysis. The question is: what has been driving the interest rate

Photo: eamesBot / Shutterstock.com

downward for 38 years? Answering this is the key to understanding recessions. As I write this, the 10-year Treasury yield has recently fallen to 1.6%. Think of the interest rate like any other price in the market. It goes up when demand for credit bids it up. But since 1981, the demand for credit has been soft, until each next downtick in rates. One interesting data point is car financing at 0%. Automakers persisted in offering it, even during the

recent period when interest rates blipped up. This subsidy surely cost them billions of dollars, but their marketing departments determined the cost to be lower than the sales they would have lost. A CRISIS AT THE FED If borrowing slows enough, then the economy enters a recession. There is, of course, a variable lag between a change in rates and borrowing—big projects are planned years in advance. But just as a hike in the price of steak will result in a decrease in meat consumption, the same happens with credit. When the Fed tries to hike short-term rates, the long-term rate may not move in the same direction. If not, it crosses below it. Then falling demand to borrow wins out over monetary policy, and the Fed is forced to take back its hike. Which recently occurred. EG

For further information, please visit: www.monetary-metals.com 44

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LEGAL & ADVOCACY

Dr K Olsen Global Tax

Strategy & International Tax Planning Our interview with KNUT OLSEN, CEO of Dr K Olsen Global Tax, charts the mitigation and efficiency strategies deployed by one of Europe’s pre-eminent companies providing effective tax advisory services to institutional and private clients. We sit down to talk all things taxation with one of the world’s leading tax advisors. As a Chartered Global Tax Advisor, what prevailing headwinds do you see impacting in the global economy? There is no doubt, the global tax climate will KO change and it will change for the worse. Multinational corporations will be exposed for higher tax risk and scrutiny, with more frequent tax inspections, tougher tax authorities and more time consuming and costly disputes and litigation. Unfortunately, not every corporation is prepared for these uncertainties and risks. EG

What typical challenges are presented with transparency in tax planning? Global tax planning will always be a red flag for KO the tax authorities. Transparency is a necessity in order to combat tax evasion, but transparency on tax planning might trigger unnecessary suspiciousness at the tax authority and tax inspections. How may larger organisations benefit from EG your thorough knowledge of the tax appeal process? Dr. K. Olsen Global Tax has a unique global KO tax experience, not many tax advisors have such qualifications as 12 years tax education inclusive a PhD and two master degrees in international taxation as well as four years education as a tax inspector, specialising in tax audit techniques. Further, Dr. Olsen has 38 years’ experience as a Chartered Global Tax Advisor, Head of Global Tax, Adjunct Tax Professor, Tax Inspector, and lecturer EG

at the Tax Inspector School. He also has a background as a lawyer, an economist and accountant and he has a good understanding of international business. Tell us about some of the opportunities and EG pitfalls associated with Transfer Pricing? Transfer Pricing (TP) might be used as an KO excellent tool for tax planning – but only if it is fulfilled correctly and within the law. On the other hand, Transfer Pricing is probably the highest risk of any kind for all multinational corporations for several reasons. Firstly, multinational corporations have TP risks in every operating country, perhaps more than 100 countries. For example, if a corporation uses the wrong price on goods or services, it is likely that it is wrong in every country. Secondly, the corporations have historic risks in all operating countries as the tax authorities might have made adjustments ten years backwards. Thirdly, there is a risk of penalties in all operating countries and the penalty might be more than 100 %. Fourth, there is definitely a risk of double taxation in more than one country. Fifth, there is always a risk that the tax inspectors are not qualified, lack experience or have preconceived opinions which is wrong. Sixth, there is a high risk that it might be time consuming and there may be costly disputes with tax authorities followed by litigation. Seventh, the wrong decisions, thorough inspections might trigger time consuming disputes and litigation which may significantly affect the corporations’ financial situation.

• Productivity, Strategy, Profitability

How can you help institutional clients with ISO certification? Significant elements of ISO are to identify, KO analyse and mitigate risks, establish satisfactory documentation, fulfil continuous improvement and evidence for all stakeholders like the tax authority that you have done your homework. Dr. Olsen’s opinion is that you might get the tax authorities off your back far sooner with an ISO certification on TP. What impact do you think that the EG introduction of trade tariffs will have on global tax revenues and fiscal policies in the next five years? The tax and complexity will without a doubt KO increase. EG

How has your PhD in International Taxation equipped you to succeed at the forefront of international tax planning? Achieving a doctorate in international taxation KO gives you a thorough and in deep understanding of the subject. EG

What future implications do you see for corporations with the increasing digitisation of taxation? One implication will be the question of where KO the corporation operates their business and where they have a permanent establishment. EG EG

For further information, please visit: http://www.knutolsen.com

Photo: Kirsti Hovde, Lillehammer Norway

LEGAL & ADVOCACY

SOG / Samardžić, Oreški & Grbović

Photo: Atstock Productions / Shutterstock.com

Asset Purchase Prices and the Protection of Competition What does the purchase of a prominent shopping mall in the centre of New Belgrade and the purchase of a mill and related flour production facilities have in common? Article by

Article by

PARTNER SOG / SAMARDŽIĆ, OREŠKI & GRBOVIĆ

SENIOR ASSOCIATE, SOG / SAMARDŽIĆ, OREŠKI & GRBOVIĆ

Miloš Velimirović

oth transactions have been or still are on hold, due to the fact that their realisation is conditioned with the approval of the Commission for protection of Competition (hereinafter the “Commission“). And for those nonenlightened, having in mind the seriousness of penalties that include up to 10% of income (cumulatively in the world) and untangling of the concentration, the best course of action is to tread lightly when considering obligations under the Serbian Act on Protection of Competition.

REPORTING PURCHASES But why do you need to report a purchase of an asset to the Commission as a concentration on the market, one may wonder? Is it not logical that concentration only occurs when a company purchases another company, therefore resulting in obvious concentration? Obviously not, and here is why.

Milan Novakov

The legal basis for the obligation on reporting of a purchase of an asset may be found within Article 17 of the Act on Protection of Competition, specifically within Paragraph 2 that reads: “Acquisition of direct or indirect control by one or more market participants over … a part of that company which can operate as an independent business entity.” Therefore, the key lies within the underlined part. But the question which imposes itself is: What does operating as an independent business entity actually mean? – and the answer to this question significantly determines entities obligation to report the concentration occurring with an asset purchase. In accordance with the practice of the Commission, an independent business entity is an asset that may represent a separate technical entity that has the ability to supply the market with a new or known product or service, therefore

• Productivity, Strategy, Profitability

creating value for the market while independently generating income that is directly attributable to it and consequently gaining a certain share of the market. Acquisition of such an entity may be viewed as concentration. The procedure eventually ceased with the conclusion of the Commission dated on 27th January 2017; however, this conclusion has brought fruitful insights into the mindset of the Commission, at least when concentrations related to the purchase of real estate are a matter at hand. IN SUMMARY Nowadays, it is safe to say that the practice of the Commission in this respect is used as a backbone in any legal assessment of obligations to report the purchase of an asset to the Commission. But, how is any of this related to the title of this article, one may ask? Well, if we avoid thinking of the terribly enormous penalty that one may suffer for not reporting a concentration in Serbia, there is also a considerable fee for reporting of the concentration to the Commission in the amount of up to €25.000. And of course, one must not forget to add the related legal fees. EG

For further information, please visit: www.sog.rs

LEGAL & ADVOCACY

British Politics

Has Britain Already Legally Left the European Union? On March 29, 2019, Britain was supposed to withdraw from the European Union for good. However, the official story is that it didn’t happen and instead, British politicians have continued their frantic attempts at deciding when the nation will finally separate itself from the bloc, under which circumstances it would happen and if it would happen at all, writes Rachel Smith. hile Britain didn’t leave, according to the “constitution” of the European Union (also known as the Lisbon Treaty), the departure should have taken place exactly two years after the submission of the application for withdrawal. This submission was sent by Prime Minister Theresa May to Brussels on March 29, 2017, nine months after the referendum, in which the British people have successfully voted to leave the EU. The notice of withdrawal had been given the Royal Assent by Her Majesty the Queen of England.

DISAGREEMENTS & DELAYS Despite the popular vote and the legal guidelines outlining the timeframe for separation, Brexit, it seems, never happened as British politicians could not agree between themselves on the conditions of the withdrawal. Both leading parties - the ruling Conservative and opposition Labour - are split on the issue of Brexit into at least three factions each, and none of the proposed action plans in regards to the EU manages to reach an agreeable majority in the parliament. On March 18th, the European Union gave Britain a reprieve until April 12th to make a decision. On March 29th, the House of Commons made a third attempt to pass an exit agreement drawn up between the British government and Brussels, but just like the first two, it ended in failure - the deputies rejected the document by 344 votes against 286. At an emergency summit on the evening of April 10th, the European Union offered Britain to postpone the withdrawal until October 31st… BRITAIN HAS ALREADY LEFT Delay after delay, obstacles have continued to pile up on Britain’s way out of the EU, but it should have left on March 29th. In fact, many British solicitors,

Photo: Sashkin / Shutterstock.com

barristers and QCs agree that it legally already did! Such is the case of Robin Tilbrook, Chairman of the English Democrats, who recently challenged delays to the implementation of Brexit as illegal in the High Court. Tilbrook argues that Theresa May did not have the legal authority to extend the process of the UK remaining in the EU beyond the 29th of March and that the government did not get the mandatory Act of Parliament to extend a new date, which should have been passed by the House of Lords and the House of Commons. It appears, therefore, that whether Britain will leave or not should no longer be a debate. If the law is followed and respected, the country is technically already to be considered as independent from the European Union. In this regard, for those that wish to see it back within the bloc, the only way for the UK to go back into the EU now would be via a

• Productivity, Strategy, Profitability

BREXIT, IT SEEMS, NEVER HAPPENED AS BRITISH POLITICIANS COULD NOT AGREE BETWEEN THEMSELVES ON THE CONDITIONS OF THE WITHDRAWAL.

referendum under article 50 section 3 - effectively a brand new application. However, this would then force the UK to accept the Euro, accept The Schengen Agreement, and permanently relinquish sovereignty to the Lisbon Treaty. EG

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FDI & INWARD INVESTMENT

Andorra FDI

Andorra’s Investment Appeal Of all the smaller principalities in the world, Andorra could be the least publicised for the financial benefits and attractions it holds for foreigners. A landlocked, tiny country of just under 470 square kilometers, Andorra has France as a northern neighbour and crosses into Spain in the south. Situated among the southern peaks of the Pyrenees Mountains, the country is a picturesque tourist magnet for millions every year, writes Rachel Smith. idely recognised as constituted by Charlemagne or Charles the Great in the eighth century, Andorra was confirmed as a principality by a 1278 charter. The diarchy recognises the Catalonian Catholic Bishop of Urgell and the French president as governors of this sixth-smallest European nation. Circa 1993, a constitutional parliament was established, making the two recognised rulers only honorary heads of state. Featuring in global appraisals as the sixteenthsmallest nation on earth, the originally Spanish population numbers less than 80,000. Around half of the country’s residents are still officially foreign nationals. Catalan is the official national language, although Spanish, French, English and Italian are commonly heard in the country. Some 10 million tourists visit the country each year, making tourism the prime industry of the tiny nation. The annual Tour De France cycle race also runs through the state, attracting many visitors each year. Although not an EU member state, Andorra utilises the euro as its official currency. The nation has struck a delicate balance between complying with EU member stipulations and maintaining its ability to order its own affairs.

ANDORRA’S ‘’TAX HAVEN’’ STATUS DEFINED Although landlocked, Andorra does present as central for many investors’ business purposes. The country’s rulers have also recognised the need to embellish its innate scenic value to tourists, with commercial benefits for investors as well. Is Andorra a tax haven? The Organization for Economic Cooperation and Development (OECD) lists a number of factors that officially define a tax haven. These include very low or zero taxes, transactional anonymity, and an opaque veneer that guards internal dealings. In addition, The US government’s Accountability Office also notes Andorra for lacking requirements for a substantial local presence by foreign businesses and individuals. Self-promotion as a tax haven or offshore financial hub is also typically flagged as one of the hallmarks of tax havens the world over, although Andorra is less vocal on this than many others. It has struck a balance between benefits for investors and compliance with broader EU operational requirements. As it currently stands, neither the EU, The Financial Action Task Force (FATF), nor the OECD list Andorra as uncooperative or officially a “tax haven.”

TAXATION IN ANDORRA In layman’s terms, however, Andorra is often deemed a “tax haven,” and the reasons are many. Although not meeting watchdog bodies’ definitions per se, the local taxation structure has many benefits. Individuals earning personal income that exceeds €40,000 per annum enjoy a capped tax rate of 10 percent. Corporate tax, too, is capped at the same low rate. Andorra has also avoided the usual touch-it-tax-it structures of the vast majority of countries around the world. In other words, double taxation is a nonstarter in the principality. Assuming an individual derives a dividend from a 10 percent-taxed company, for example, no further personal taxation is payable on that dividend.

IN A PROACTIVE BID TO ATTRACT INVESTMENT, LEGISLATORS HAVE ALSO MADE IT POSSIBLE FOR FOREIGNERS TO OWN 100 PERCENT OF ANY BUSINESS IN THE COUNTRY.

Andorra does have a general sales tax, known as IGI, but it is set at just 4.5 percent. Real estate taxes are also negligible in comparison to the vast majority of the world’s countries. To this end, although on the cusp of official tax haven status, Andorra shares its approach on these matters with Hong Kong, Switzerland, Singapore and even the Czech Republic. Indeed, there are quite a few countries never suggested to be “tax havens” of any sort that levy even less corporate tax, like Hungary, Estonia and Latvia. For high net worth individuals and companies looking for a European home base that is both compliant and beneficial, Andorra sits high on the list. Entities can legally reside in the country with ease while paying a very low tax rate. Through methodical extrapolation and absorption of EU policies on banking and finance, Andorra has managed to maintain its minimal taxation while

• Productivity, Strategy, Profitability

still being cooperative with global authorities and regional partners. A number of healthcare products and services, as well as rent, welfare goods and services are zero-rated in the country. For the foreseeable future, the country is likely to occupy the grey, yet broadly positive, arena of attractive yet compliant nation-states. Being such a decidedly European nation and situated between key European countries, Andorra lacks the farflung associations of pariah tax havens. Indeed, the Andorran parliament has made it clear that the country never “made the strategic decision” to present as a tax haven. The general sales tax on goods and services is simply able to fund the modest requirements of administering the tiny country, and thus no extensive tax network has evolved. Although small, the government has successfully steered internal legislation in accommodating the host of new financial regulations that have issued from Brussels over the last decade. In 2019, Andorra is negotiating double-taxation arrangements with various neighbours and other countries, but with a decided lean towards preserving its current state of

Photo: marcin jucha / Shutterstock.com

FDI & INWARD INVESTMENT

Andorra FDI

affairs, while still ensuring good relations abroad. INVESTMENT AND RESIDENCY IN ANDORRA Unlike many other “offshore” beneficial destinations for business and investment, Andorra lacks a focus on the classic products typically found in these economies. Trusts or specialised tax arrangements for banking, insurance or investment are absent in this mountainous land. Indeed, minor local property taxes, corporate registration fees and custom duties have traditionally filled government coffers. Even personal income and general sales tax have been very recent introductions. As a result, the country has become a beneficial business hub almost by default, simply on the back of a lack of government avarice and typical public spending on infrastructure or other large capital projects. Boasting Europe’s highest capital city, with Andorra la Vella sitting at an elevation of some 1,023 meters, public works are constrained by geography and the very small population in the country. Andorra maintained for a long time the legal stipulation that there be majority ownership of any business by resident Andorrans. This has now fallen away, giving rise to an easy-going approach to foreign business. Private foreign clients have always patronised the country’s banking sector, but now a large diversity of companies are looking at Andorra with new interest as a home base. During May 2012, Andorran legislation was amended to accommodate a “physical presence” residency requirement of just 90 days per annum. This is comparably highly favourable, particularly for high-net worth individuals, who are often penalised

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by the onerous residency conditions of investment destinations. The minimum investment threshold was also raised to €400,000, a still-low figure for the average international corporation or wealthy individual looking to limit tax losses. Three types of residency are available in the country: • Residence without business activity: Here the 90-day residency requirement kicks in, along with a minimum investment of €400,000 in Andorran real estate, an Andorran company shareholding, or financial investments such as deposits or other traded financial instruments. Applicants will also need to demonstrate their means of self-support, with a €50,000 deposit per principal and €10,000 per dependent forming part of the of €400,000 overall requirement. • Professional residence conducting international business: This categor y requires the employment of a single Andorran national, the ability to prove that some 85 percent of business is conducted outside of Andorra, and proof of income that demonstrates selfsufficiency. The deposits of either €50,000 or €10,000 per person must again accompany application. • Scientific, cultural or sports residence: The 90-day residency applies to this category, as well as the same self-sufficiency deposits and supporting paperwork.

dividend taxation, and no estate duty. Andorra is a simplistic and welcoming haven for those who wish to manage their financial affairs without constant losses to government coffers. An incredibly low crime rate, excellent schooling, and top-drawer medical facilities embellish Andorra’s attraction for foreign investment, too. In a proactive bid to attract investment, legislators have also made it possible for foreigners to own 100 percent of any business in the country. Although requiring sanction from the authorities, such arrangements are rapidly expedited. Nonresident property developers are curtailed, however, and non-resident companies are limited to buying only property deemed necessary for conducting their business affairs. Investors will need to hold an Andorran bank account as a further, logical stipulation of investment in the country. Keeping the peace with EU authorities, while not rolling out a mass of complicated tax legislation, makes Andorra a very attractive destination for companies and high net worth individuals. For anyone looking for a business-friendly country with a high standard of living, Andorra should feature among top contenders. EG

LIVING AND WORKING IN ANDORRA In Andorra, there is low personal taxation and no double taxation, no capital gains, wealth or

Summer 2019 •

FDI & INWARD INVESTMENT

San Marino FDI

San Marino - A Series of Advantages The independent state of San Marino is located on the rugged terrain of the Italian peninsula in the northeastern part of the Apennines mountain range, on Mount Titano. It is an enclave surrounded entirely by another country - Italy. San Marino is one of the smallest countries in the world, with a size just slightly over 61 square kilometres. Its total population as of 2017 was of 33,400, according to the World Bank, Eurostat. The official language is Italian, says Thomas Hughes. n 1991, San Marino joined the International Monetary Fund and signed a cooperation agreement of the Customs Union, as a member of the European Economic Area. In 1992, the republic became a member of the UN and, in 2000, it joined the World Bank. By virtue of the agreement, export-import relations between the EU and San Marino are exempt from customs duties. After the signing of a monetary agreement with the EU, it began to use the euro as the official currency of the state. The economy of San Marino primarily rests on the manufacturing sector, which makes up 36.4% of the country’s GDP and the banking and insurance sectors that amount for 18.6%. On the other hand, tourism also plays a major role, luring the visitors in with a picturesque mountainous landscape and exceptionally cheap prices for a sweet getaway of wines and gastronomic delights.

A SERIES OF ADVANTAGES A stable government and a strong, developed financial sphere make San Marino a favourable destination for foreign investment. While the republic has suffered from the reputation of a tax haven, its agreements with the EU have legitimised its stance on the global market. Nonetheless, it still offers benefits for high net worth companies and individuals. Though income tax can sometimes reach almost 50%, there are advantages with the dividends, such as a relatively low capital gains tax of only 5%. The local business tax rests at 17%, but can be cut in half within the first five years. A limited liability company must have a social capital of €25,500 and an anonymous company must have a value of €77,000. There are ways to become a resident of San Marino by investment. You may do so by creating a

Photo: ALEX_UGALEK / Shutterstock.com

WHILE THE REPUBLIC HAS SUFFERED FROM THE REPUTATION OF A TAX HAVEN, ITS AGREEMENTS WITH THE EU HAVE LEGITIMISED ITS STANCE ON THE GLOBAL MARKET.

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local company with 5 full-time employees and the purchase of a building worth more than €300,000, or making a bank deposit, as well as registering for an annual insurance of at least €30,000. You can also retain a 51% stake in a local company, hiring 1-3 specialised employees, making a bank deposit of €75,000 and then another deposit of €75,000 during the first two years of residence. It is also possible to obtain residency by purchasing property worth over €500,000. BECOMING A CITIZEN However, even as a resident you must remain in San Marino for 30 years in order to receive its passport. Interestingly enough, the Sammarian passport is the only passport in the world that allows you to travel to China without a visa! EG

FDI & INWARD INVESTMENT Morocco Agency for Tourism Development

Photo: Steve Photography / Shutterstock.com

Tourism in Morocco Tourism is constantly changing Worldwide. Having the ambition to be an attractive destination involves adapting the proposition to the consuming habits to new categories of investors and tourists alike. In the past, providing full service hotels was enough! Nowadays, in order to remain attractive, destinations have to invest heavily in upgrading the quality of their offering while keeping prices competitive.

Article by

Imad Barrakad

CHAIRMAN AND CEO, MOROCCO AGENCY FOR TOURISM

ourism is constantly changing Worldwide. Having the ambition to be an attractive destination involves adapting the proposition to the consuming habits to new categories of investors and tourists alike. In the past, providing full service hotels was enough! Nowadays, in order to remain attractive, destinations have to invest heavily in upgrading the quality of their offering while keeping prices competitive.

THE MARVELS OF MOROCCO Making Morocco an attractive destination for tourism investors is what The Moroccan Agency for Tourism Development (SMIT) works for. SMIT involvement, as a governmental body, is about defining and implementing outstanding

promotional actions and incentive measures in order to position Morocco as a magnet to attract visitors as a tourism investment destination. Its ambition is to increase the value and attractiveness of Morocco’s tourism products and the industry chain as a whole. Moreover, building on its experience in structuring and implementing key development projects and relying on a team of experienced professionals, SMIT provides private investors, developers, local authorities and various government bodies, personalised and valuable insight and advice with regards to projects taking place in Morocco. Our objective is to support our partners in their projects in order to increase the chance of success and enhance the return profile of their development. In order to maintain the competitiveness of the destination, SMIT works thoroughly to satisfy the needs of investors, while keeping in mind tourists’ final experience and consumer trends. That is an important dual mind-set to adopt in order for us to be successful in our mission. As far as Morocco is concerned, I think that for the years to come, we need to focus on strengthening cultural tourism in the country which still has a lot

• Productivity, Strategy, Profitability

of potential by offering unique and unparalleled experiences. We are also getting to a point where the hotel supply on all segments but particularly within the high-end niche has reached a peak without being matched with similar offers in terms of leisure. So our focus is now on leisure and entertainment through the development of theme parks, Holidays centers, sports equipment and activities such as Riding, and Surfing, among others. CREATING NEW OPPORTUNITIES We are fully aware of these fast changing trends and we try as much as we can to offer adapted services and solutions to match all needs. We also need to meet the expectations of local communities by creating new concepts that fit within the destination and with the local existing tourism potential to enable the local population to benefit from these investments such as job creation, new business opportunities and ultimately bring economic development and growth to all regions of the kingdom. EG

For further information, please visit: www.smit.gov.ma

MOROCCO INVEST IN TOURISM WWW.SMIT.GOV.MA

FDI & INWARD INVESTMENT

Incrementum AG

Liechtenstein Respectful, Safe and Solid Independent and right in the heart of Europe, Liechtenstein is a perfect place for wealth and investment management services. While in large financial centres clients are being directed increasingly into standardised products, wealth and investment management services in Liechtenstein are still being offered with a personalised touch and in a customisable manner. Article by

Stefan Kremeth

CEO AND CO-FOUNDER, INCREMENTUM AG

he Principality of Liechtenstein is a constitutional monarchy and the fourth smallest country within Europe, its borders have remained unchanged since 1434. Liechtenstein spreads over an area of just over 160 square kilometres and its population counts roughly 38’000 inhabitants. Economically speaking, Liechtenstein is safe and rock-solid - it has no sovereign debt and its currency, the Swiss Franc, is among the most stable worldwide. During the Great Financial Crisis of 2007/2008 none of the large Liechtenstein banks needed government support. Healthy balance sheets, realistic risk aversion, natural reservation against profit maximisation and prudent management helped avoiding the sort of calamities that happened to financial institutions in other financial centres.

A STABLE JURISDICTION Since Liechtenstein is a member of the European Economic Area (EEA), it follows European Financial Markets Law. The Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) provide for a harmonised and robust regulatory environment for investment services across the member states of the EEA. The main objectives of these directives are, to increase competition and consumer protection in investment management services across the EEA member states. These laws are not applicable in NonEEA member states and especially when it comes to consumer protection, regulations in countries outside the EEA are lagging behind currently. Asset management and investment services providers in Liechtenstein, as in the rest of the EEA, need approval by Financial Markets Authorities (FMA). This leads to better enforcement of control mechanisms by the regulator and thus stands for higher levels of consumer protection. Additionally,

Photo: RossHelen / Shutterstock.com

all financial intermediaries in the EEA need to affiliate with a “Deposit Guarantee and Investor Compensation Foundation” in Liechtenstein or a local equivalent of it, again very much unlike in many other global financial centres. The system of “self-

ECONOMICALLY SPEAKING, LIECHTENSTEIN IS SAFE AND ROCK-SOLID - IT HAS NO SOVEREIGN DEBT AND ITS CURRENCY, THE SWISS FRANC, IS AMONG THE MOST STABLE WORLDWIDE.

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regulating organisations” as applied in other financial centres is not legit within EEA member states. A RESPECTFUL BUSINESS ENVIRONMENT Finally, wealth and investment management knowhow has been part of Liechtenstein’s DNA for decades. Therefore, offering personalised service comes quite naturally. Thanks to the backing and support by Liechtenstein demographics and to the customer-friendly and respectful business environment, clients feel welcome and appreciated. Last but not least, the internationally reputable University of Liechtenstein has an acknowledged faculty for financial sciences, which is dedicated to researching new trends and challenging existing financial markets theories. As such, Liechtenstein benefits from experienced, well-trained and educated financial professionals who are truly dedicated to providing a world-class service to their clients. EG

For further information, please visit: www.incrementum.li

O'CONNOR PORTFOLIO MANAGEMENT, LLC. 201 East Davis Boulevard TA M PA , F L 3 3 6 0 6 813-254-5120 2 0 2 0 N . L a s P a l m a s Av e Los Angeles, CA 90068 213 632 8121

GEOPOLITICAL AFFAIRS

British Politics

he shuffle in Theresa May’s exit has given rise to the “Boris bounce,” a moment’s optimism around the Conservative’s ability to take more decisive control of Brexit. Polls show a moment’s surge for Johnson at Farage’s expense, but the real test is yet to come. As Britain grows both bored and bothered by Brexit realities, Johnson has a tightrope to walk ahead. Farage’s cohort won the 2019 European Parliament election in the UK after only four months of existence. Popular sentiment is churning in Great Britain. Of all new appointees, possibly the most vexing portfolio belongs to the new Chancellor of the Exchequer, Sajid Javid. A former contender for party leader, Javid joins Priti Patel as two prominent people of colour appointed to Johnson’s cabinet. In spite of such cosmetic architecture, the left has spurned Johnson’s appointments as colour blinding. Long a highly-conservative proponent of a singular Britain, Javid has also bizarrely been seen as pro-union at times, and remains the brunt of opposition jibes. Javid is allocating a further GBP 1 billion to increase funding of a no-deal Brexit as one of his first responsibilities. Recent mutterings from deal manager Michael Gove has made a no-deal falling out a “very real prospect,” in spite of a campaign-trail Johnson assuring voters that it would be a “millionto-one” chance.

FARAGE’S ‘‘CLEAN-BREAK BREXIT’’ PITCH STILL HAS WIDE APPEAL, AND JOHNSON’S RESIGNATION TOWARDS A NO-DEAL EXIT MAY STILL TURN SHARPLY TO BITE HIM.

Photo: katatonia82 / Shutterstock.com

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GEOPOLITICAL AFFAIRS

British Politics

The Buck Stops Here: The New British Premiership Officially taking office on July 24, 2019, few UK premiers have faced what Boris Johnson will face. With Brexit looming and mutating from a national bent to a political party, Johnson will need extreme tact and political manoeuvring to serve a popular term. With the Brexit Party of Catherine Blaiklock leaping onto the euro stage under Nigel Farage, a new era is dawning in British politics. A former London mayor, Johnson appears well received by the populace, writes Rachel Smith. BRACING FOR BREXIT Will the buck really stop with Johnson? Two aspects of the UK’s latest political developments are provoking interest, and ire. Firstly, is Johnson building himself a cabinet of plausible fall guys, designed to enable a drastic change of direction if needs be? And, no matter Johnson’s architecture and intent, will the Brexit Party yet rise to midwife an even more drastic turn of events? Long the fiefdom of either the Conservatives or Labour, the Brexit Party’s dramatic popularity out of the gate holds the real prospect of fundamental changes on the UK political scene. The Brexit Party campaigning for a British withdrawal from the EU while maintaining World Trade Organisation (WTO) terms of trade struck a chord with citizens. Although Johnson is capitalising on being a breath of fresh air, it remains worrying that for a man who practically laughed off a no-deal exit, he is presiding over a broad acceptance of its looming reality. Given to such populist grandstanding, followed by muted and wholly opposite realities, sceptics are already trying to decipher Johnson’s real mettle, foremost among them the opposition. Jeremy Corbyn’s Labour was blistered in Johnson’s very first address to the house, and notwithstanding its barrage of disturbing facts and figures against

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Johnson, Labour has taken a blow. Suddenly on the back foot, Corbyn has issued assurances that he intends staying on, while pundits predict several former Labour strongholds to lean towards Johnson in the near future. Still spluttering, Labour has presented poorly to date since Johnson’s appointment. Dredging up old and somewhat irrelevant snippets of the past, Labour’s legitimate concerns around Johnson’s real intentions are being drowned out in a moment of mild Conservative euphoria. Farage’s “clean-break Brexit” pitch still has wide appeal, and Johnson’s resignation towards a nodeal exit may still turn sharply to bite him. At odds with May over Brexit details, another new cabinet appointee also has his hands full right now. Dominic Raab resigned in 2018, and the highly ambitious and nuanced former contender for Conservative leader is now the new foreign secretary. It will also be his diplomacy — or lack thereof — that stems the rise of Nigel Farage’s highly populist agenda. BREXIT LOOMS On October 31, 2019, Brexit becomes a reality. With the new leadership at the helm, will the UK finally be in a position to leave the European Union on good terms, and deliver the exit that 17.5 million people voted for? Is there a prospect that Johnson will renege on what now appears a firm commitment to the will of the British electorate? And, if not, how exactly will Johnson do it? While the relative ease of a no-deal falling out presents as a soft option now, a no-deal Brexit is likely to torment and ultimately torch Johnson’s tenure months from now. Johnson has stated that he would “deliver Brexit and unite the people,” but the arrival of the newlyformed and highly popular Brexit Party is holding the incumbent leader’s feet to the fire. Not yet a serious discussion, the fact that a fundamental break with the Labour-Conservative domination of times past has entered British politics is still a dramatic shift. Lost in the forward march to Brexit, Brexit itself yet holds the prospect of wholly new political dominion in the UK, just as it tears away from the EU. Will the buck really stop with Johnson and his new cabinet? Should the promise made to the British people after the 2016 Referendum ultimately be completely disregarded in favour of statism, it

might well spell a longer-term earthquake in British politics. The authoritarian nature of EU institutions and supranational treaties that undermine British sovereignty and national autonomy are precisely the aspects of union politics that prompted a Brexit vote. If Johnson but wavers or attempts to assuage prounion camps, an earthquake indeed looks likely. Although it now seems ancient history, British citizens were always adamant in their position as the EU grew ever more into reality. While a single currency has come about with difficulty but relative understanding nonetheless, the single entity of an EU that includes Britain has made British citizens baulk at inclusion. BoJo may have taken the reigns as a solid candidate to many, but domestic difficulties — including an aggravating financial obligation to the EU — remain the same. Were any aspects of domineering EU policy again exposed in Johnson’s handling of Brexit, it’s likely to spark a rapid decline in popularity. Johnson is on a knife-edge as few incoming British premiers have been. Of all of the British leaders of the last decade or two, his moment in time will be the most unforgiving. While many world leaders have taken office with the promise of a clean sweep, a reordering of affairs, the buck that Johnson maintains stops with no one else but him, is a wilder animal than others. Both the electorate as well as the opposition will grant BoJo no margin for error, a fact more alarming against the backdrop of his already soft swing on a no-deal exit. From “a million-to-one chance,” a no-deal exit has almost overnight became an accepted anticipation. Trading on a moment’s understanding as a new cabinet gets up to speed, Johnson has no further wriggle room. Brexit is upon the nation — but some 90 days away — and the knives have been out in all camps for some time now. BREXIT IS A PARTY NOW Is BoJo big promises but all talk, or will he somehow keep Nigel Farage at bay? His stance implies that his leadership holds the answers to what remains a divisive, protracted and thorny issue likely to bedevil British politics for many years to come. Post-election euphoria, the very gritty task of pleasing all parties while remaining true to the will of the British people looms for Johnson. Taking centre stage as the people’s executioner, Johnson will face many dilemmas over the next few short months. More than buck will befall him should he fail to follow through with the will of the British people to implement fully a withdrawal from the EU. The devil is in the detail, as the interrelationships between the UK and Europe at large remain, commercial interests remain, as do other global political realities, none of which present as easy journeys. Against the backdrop of the newly-formed, diverse and wildly popular Brexit Party, Boris Johnson vowed to take personal responsibility on Brexit, having said, ”never mind the backstop, the buck stops here.” Promising to disprove ”doubters… doomsters and the gloomsters,” any diversion by Johnson could well lead Britain to a radical transformation of its two-tiered political history, with BoJo risking the most dramatic fall from grace of any UK premier to date. EG Summer 2019 •

GEOPOLITICAL AFFAIRS

Global Outlook

Lessons from Venezuela: thriving in a post-deflationary barter economy Plagued by a lack of necessary resources, governmental oppression and a completely decimated economy, the citizens of Latin America’s once most thriving nation have been in survival mode for soon nearly a decade. As we empathise with the plight of Venezuelans from the bottom of our hearts, there is also much that we can learn from this unfortunate situation, thinks Thomas Hughes. n fact, it isn’t the first time that a showstopping crisis has completely broken a countr y. Such instances have happened in contemporary times with nations like Yugoslavia, Zimbabwe, Hungary and the Weimar Republic. Considering that Germany has warned its citizens to stockpile food in recent years, it isn’t a long shot to contemplate more countries collapsing under the weight of reckless Quantitative Easing programmes that have been initiated by Central Banks worldwide. So, as the saying goes, it’s better to be safe than sorry! Let’s take a look at how Venezuela got to its breaking point, what are some of the biggest challenges that its people face in times of crisis, and how can you possibly prepare to survive and even thrive if it ever happens in your own country. Read on to learn more about the collapse of Venezuela and what lessons we can draw in order to prosper in a post-deflationary barter economy.

THE ROOT OF CRISIS IN VENEZUELA Corruption, hyperinflation and reckless mismanagement of resources…For several years now, Venezuela has suffered the worst economic and social collapse in modern history, despite having the world’s largest oil reserves. Its political crisis is rooted in a series of economic failures that have plunged the country into this disastrous

humanitarian catastrophe. Today, Venezuela is left with two presidents playing tug-of-war, while thousands of citizens continue to go out on the streets in protest. Though Venezuela used to be a thriving nation, its wealth primarily came from the petroleum trade. Unfortunately, the government has never sought to diversify its economy and in 1998, just before the arrival of Hugo Chavez in power, oil accounted for nearly three quarters of the country’s exports, while today it represents almost 95%. Being this reliant on a single resource didn’t fare well for the country. When oil prices began to fall in 2014, the country’s economic situation deteriorated rapidly and it was ill prepared to survive such a change. On top of that, the government maintained uncompromising control over everything, doing whatever it pleased. Chavez’ heavy focus on nationalisation had chased away foreign investors and his failure to invest into other sectors has lead to this unfortunate outcome. With every area beside oil left ignored, Venezuela has suffered issues like constant power outages due to a decaying electrical infrastructure. The fact that it possesses the world’s largest oil reserves has been tainted by irresponsible mismanagement and excessive reliance on that one resource. At first, the wealth of petroleum has allowed Chavez to finance

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massive social programs, which has greatly lowered the poverty rate of the population in the first decade of the new millennium and made him quite popular with the people. However, the oil infrastructure was badly maintained and it remains in a despicable condition today. Seeing as Chavez had fired many engineers of PDVSA - the national petroleum company, to stifle a strike in the midst of the last decade, Venezuela was forced to be dependant on the United States for refining its oil, which, in turn, made the country susceptible to American sanctions that weigh heavier than ever on its economy today. Venezuela’s crisis is also rooted in a system where corruption is nothing short of the norm among government officials. Upon ascending to power after Chavez’ death in 2013, Nicolas Maduro has given full control of PDVSA and the economy to his generals. Of course, the greedy and inexperienced officials only hastened the fall of the oil giant, which was the sole backbone of the Venezuelan economy for over two decades. Pair it to the corruption, extensive bribes and tax evasion, and you’ve got a recipe for disaster! On top of that, the Bolivar (Bs.F - Bolivar Fuerte, ironically translated as “strong”), has become completely worthless. Since 2013, the country was facing exponentially rising inflation.

GEOPOLITICAL AFFAIRS

Global Outlook

Actually, according to the International Monetary Fund (IMF), Venezuela’s Hyperinflation Rate is projected to hit 10,000,000% this year. With a minimum monthly wage of 18,000 bolivars per month as of January 2019, which translates to $6.70 as reported by CNBC, a Venezuelan can barely buy enough meat for a week. Needless to say, this situation has completely annihilated the middle class and plunged the citizens into extreme poverty, which only contributes to the already deteriorated situation in the country. All of these factors have made the Venezuelans’ everyday lives particularly difficult. Every day, the struggle to feed and care for themselves becomes increasingly unbearable. Toilet paper, soap and hygiene products are thus widely unavailable, because the government has failed to develop those markets while focusing almost exclusively on petroleum. As a result, the country is experiencing a resurgence in diseases like measles, malaria and dengue due to subpar living conditions and limited access to medical support. Those who are lucky enough to have family abroad manage to receive foreign currency and are able to purchase necessities on the black market. Others seek refuge in neighbouring countries, with well over 2 million people fleeing Venezuela since 2015, mostly traveling to Colombia or Peru. WHAT DO YOU NEED TO THRIVE? So, theoretically, if your own country falls into such a crisis - which, unfortunately, isn’t unlikely considering the wobbly foundation of debt and fiat currency upon which rests the global economy what can you do to survive and even thrive? First and foremost, it’s necessary to stockpile your resources, because as soon as a crisis affects your entire sector, a shortage of basic necessities is bound to occur. Whatever type of crisis it might be, even if it doesn’t directly affect the production of goods and the shortage is totally artificial, you want

to stay safe and make sure that you and your family have everything you need. Imagine if the same thing happens with food, which is a vital need. Just as it occurred in Venezuela, in New Orleans during Hurricane Katrina, or in Haiti, panic pushes people to buy necessities en masse and when the supply can no longer satisfy the demand, hunger mercilessly takes over. Customers start shoving each other in the stores, long hours of lines lock people waiting for provisions, cargo

FOR SEVERAL YEARS NOW, VENEZUELA HAS SUFFERED THE WORST ECONOMIC AND SOCIAL COLLAPSE IN MODERN HISTORY, DESPITE HAVING THE WORLD’S LARGEST OIL RESERVES.

is diverted and resold on the black market… It is a total mess! Therefore, it is a smart move to preserve resources at home before all hell breaks loose. Seeing as we would likely stockpile our necessities bit by bit, unless you have a big budget, it makes sense to begin by storing items that do not expire, as it will help avoid unnecessary waste. For starters, it is a good idea to debunk the myth of “Best Before” dates. Often, these dates are fixed in an arbitrary manner that seeks to force people to replace their products and buy new ones quicker. Therefore, they are often irrelevant (unless you have opened the can), but do pay attention nonetheless! What do we keep then?

PORTABLE FOODS When it comes to nutrients, aim for dehydrated and freeze-dried foods, beans, rice, pasta, bread, tuna, canned foods and oils. What you are primarily looking for is optimised portability, long shelf life and bulk meals. USEFUL TOOLS You will most likely need to have something done and you cannot rely on otherwise available services when resources and money are short. Essential in your arsenal would be tools like screwdrivers, drills, hammers, nails, scissors, batteries, torches, two-way radios and knives. A source of light is never a bad idea, so keep some lamps in case your electricity goes out like it often does in Venezuela! ESSENTIALS You do not want to be using dollars instead of toilet paper, so do procure rolls, toothpaste, razors, soap and sanitary towels. If you can get your hands on a few medkits, even better! TRADE LUXURIES After the destruction of a currency, these would work in place of local money: they can be items such as whisky, scotch, rum and alcohol, soda, cigars & cigarettes, light bulbs, chocolate, gold, and silver all make for valuable barter currency if you need to acquire other products. In the end, you may end up in the problematic situation of The Coincidence of Wants. Normally, you would not trade a tractor for a chicken, or a horse for a loaf of bread- unless you need the latter and the other party needs the former. Staying ahead of the crisis means getting your hands on everything required before shortages occur. EG

Photo: Julio Lovera / Shutterstock.com

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Summer 2019 •

GEOPOLITICAL AFFAIRS

Bi-Lateral Trade

Petrodollar and Global Trade in 2019 Even among its enemies, the USD remains the de facto world currency. One persistent upshot of this is that almost all oil sales throughout the world are denominated in USD. It was the deal made by Henry Kissinger and William Simon in the 1970s — where Saudi Arabia would sell oil in US dollars after buying 30-year treasury allotments — that set this tone decades ago, says Oliver Taylor. or the longest time, nothing changed, but now other powers are looking to escape the American shadow. China in particular is entertaining the idea of its currency dominating at least its own oil imports. It has found a willing partner in Iran, and coupled with persistent Russian cheek, new dynamics are attempting to shape the commodity’s trade.

DO YOU TAKE YUAN? All countries that export oil sell it in dollars, with the USD essentially being the World Reserve currency. Because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to ensure continuous imports. This creates a consistent demand for dollars, ostensibly also supporting the currency’s value, regardless of economic conditions in the US. It would be anathema for many who predict dire consequences for the global financial system, were the rouble or yuan to become commonplace or even dominant in oil trading. Were the petrodollar to be ousted, the United States would be the hardest hit. A big picture snapshot imagines a serious dent in American dominion and its currency’s value, without much intractable financial mess for any other country. The sacred oil-dollar relationship changing is a real potential, as the Saudis themselves appear intent on ditching the hegemony of the dollar when setting oil prices. Likely to have catastrophic effects on the US economy, China stands ready to dominate oil trading in yuan if the petrodollar falls. With already massive and still rising legitimacy, both China and Russia have good reason and tremendous potential to become the new kids on the block, in the wake of the petrodollar’s demise.

Photo: welcomia / Shutterstock.com

IT WOULD BE ANATHEMA FOR MANY WHO PREDICT DIRE CONSEQUENCES FOR THE GLOBAL FINANCIAL SYSTEM, WERE THE ROUBLE OR YUAN TO BECOME COMMONPLACE OR EVEN DOMINANT IN OIL TRADING.

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WOULD A PETROYUAN WORLD BEAM OR BURN? The USD would likely take a serious hit if unseated from such a fortifying position as the world’s oil currency. Politics may yet avert such a scenario, but global power is shifting. Investors, too, are pushing gold’s value, as they hedge against rumblings from the Fed concerning rate cuts. It is entirely doable to imagine future oil traded for yuan, euros, or even gold. Should the USD be unseated as World Reserve currency, it would end US dominion on a host of fronts, and seriously disrupt the financial status quo on American soil. On the plus side, it may also result in a more egalitarian commodities market, and ultimately, more competitive pricing per barrel. Ultimately, the real loser would be the US and its currency, with a petrodollar collapse also troubling world markets for years into the future. EG

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Sheridan Resolutions Ltd

The Power of Team Coaching The International Coach Federation has identified team coaching as the single biggest area of growth in the field over the last decade and it is not hard to see why. At Sheridan Resolutions, we often talk about reasserting humanity in an era of disruption. This means that businesses must find better ways for individuals to work more effectively within their own teams – and for those teams to work more effectively with others. Article by

Caroline Sheridan

CEO, SHERIDAN RESOLUTIONS LTD

his is easier said than done. Some teams are temporary in nature; coalescing around a particular project or task; then there are virtual teams whose members work across different time zones and cultures; and there are many organisations whose teams are shrinking in favour of partnerships with outsourced expertise. Interventions that sound like team coaching (but aren’t) Distinctions between team coaching and terms such as team building, team development are evolving. Team building can be described as getting a group to function as a cohesive entity. The focus is on developing professional intimacy between team members, role clarity and collaboration. Team development looks at how to increase the performance of a team, bringing deeper forms of cooperation and collaboration to bear. Team coaching, however, is raising a team’s awareness of how it functions, while equipping it to change its behaviours in pursuit of higher performance. It applies the principles of coaching to the team as a whole.

In spite of a still-emerging set of definitions, however, there are some common factors, typically concerning: • alignment of people within the team; • detoxification, where necessary, of the working environment; • increased responsibility by the team and its members for results; and • the ability of the team to respond to changing circumstances. SYSTEMIC TEAM COACHING Systemic team coaching addresses the connections between teams, helping leadership to engage all stakeholders in the transformation of the business. Some experts describe this as “interteam coaching”. The coach helps different teams in the organisation, as well as teams from the wider stakeholder community work more effectively together. THE IMPACT ON PERFORMANCE It is too often perceived as quick fix by clients for a team coach to come in and “sort out” a team through a single intervention. This doesn’t mean, however, that team coaching interventions need to be applied throughout the organisation – it is clearly important to find the most effective point at which to insert the “acupuncture needle” and a team coach can help the business understand where that is.

• Productivity, Strategy, Profitability

THE IMPACT ON LEADERSHIP Unfortunately, many leadership structures foster only a competitive environment between organisations and teams, competing for resources, attention or money. For a leader to cede control over parts of this “territory” creates a sense of vulnerability. Therefore it is important in team coaching interventions for leaders to feel secure in themselves. Effective leadership requires courage and a change in perspective to give the people in the team the chance to develop their own skills and, in so doing, to show the leader’s respect for them as colleagues. THE IMPACT ON COLLABORATION How does team coaching help a team collaborate beyond its own immediate needs? A team can make strides in increasing its own sense of purpose and reducing team toxicity. When it passes the baton in a project to another team, however, then performance can slide back again if the receiving team members do not see the project as part of their responsibilities. Systemic team coaching asks an organisation deeper questions about collaboration and its potential for accelerating change. Change can put pressure on different parts of the organisation in the way that teams work together and face the responsibilities that genuine collaboration brings. EG

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EXECUTIVE EDUCATION

Executive Strategy

Executive Leadership Strategy If ever there was a time for skilled leadership on all fronts, it’s now. Humanity is going forward — for the first time in recorded history — into a future no one dares predict, writes Oliver Taylor. he business and political leadership arenas are due to separate truly competent leaders from the mediocre. On the march towards what is being called the fourth industrial revolution, huge challenges await. Fortunately, leadership strategies have evolved into a body of knowledge unlike any resource previously available. While broad creativity appears set to be a persistently essential tool for leaders going forward, several proven leadership strategies can also light the way.

EFFECTIVE LEADERSHIP STRATEGIES In the words of Professor Willie Pietersen of Columbia Business School, effective leadership strategies for corporate executives in the workplace are “not good enough to know, you have to excel at them.” FAST LEARNING Faster than competitors, that is. The ponds and lakes of past markets are gone, and today’s business world is a sea of waves. Competitive advantage can no longer rest on a particular business model or product — the ability to pivot on current events and walk raw into a reinvented future will take an “adaptive organisation.” A particularly illuminating case study of a start-up going from 100 to 800 staff in a decade, outlines exactly what adaptability means. EMOTIONAL INTELLIGENCE Yes, EQ — for many, still HR jargon. The confidently empathetic and emotionally astute leaders will shape our futures. Applied and measured at FedEx some years ago, Emotional Intelligence has become known, practised and evaluated. The results have made it more than just a tool among many. INNOVATION It might not be a product or a mainstream service, but perhaps small changes in the way an organisation does things that energises everyone concerned. In Australia, Panasonic is backing agri innovation by students of Murdoch University for the western region. The more future leaders are

Photo: Jacob Lund / Shutterstock.com

open to innovation, the higher the likelihood of a sustainable competitive advantage. THE DELICATE BALANCE OF FUTURE LEADERSHIP The keys to success as a strategic leader demand perhaps the hardest sacrifice from leaders: their notion of any pyramidical structure being an unbreakable component of leadership entitlement. The great leaders of the near future will be those who are receptive — to change, to feedback, and to opposing opinions. Realising the pace and dynamics of markets, future leadership strategy will be more open to drawing on human and innovative resources. For the Executive Coach, current thinking assimilates the coach as an integral part of effective leadership. Best practices in executive coaching tie directly into formulating the best strategic leadership behaviour, and the coach’s role has become exceedingly important. If a strategic leader’s job is to formulate and equip plans for the company’s future, the coach’s task is to ensure the plans take place as planned.

• Productivity, Strategy, Profitability

APPLIED AND MEASURED AT FEDEX SOME YEARS AGO, EMOTIONAL INTELLIGENCE HAS BECOME KNOWN, PRACTISED AND EVALUATED. THE RESULTS HAVE MADE IT MORE THAN JUST A TOOL AMONG MANY.

The modern Executive Coach will employ huge savvy to keep the leader in his or her care focused on core values and long-term results. No matter the coaching model, genuine interest and involvement will be the dividing factor between truly powerful coaches, and the rest. EG

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EXECUTIVE EDUCATION

Sun Yat Sen University

Lingnan’s Leading MBA Program Lingnan began its MBA education with the strong support of the MIT Sloan School of Management in 1998, and now the Lingnan MBA program is among the top ten programs nationally, enjoying an unshakable leading position in South China.

Article by by Article

Professor Lu Jun Xu Xinzhong

DEAN, LINGNANDEAN OF LINGNAN EXECUTIVE (UNIVERSITY) COLLEGE (UNIVERSITY) COLLEGE

ingnan has a team of experienced faculty members and four professors from MIT, who work with Lingnan's professors to teach core courses. Every year, four MIT professors come to Lingnan to conduct optional courses for International MBA students. In addition, the MBA Program invites many leading global scholars to teach. Lingnan also engages senior corporate executives in course design and delivery. For example, senior executives from Deloitte deliver a course in the area of consultancy for business. Lingnan carries very distinctive international features and for International MBA programs, all courses are delivered in English. International students and exchange students create a diverse and multi-cultural learning environment. MBA students will conduct a study tour at MIT to complete a module of study and visit innovative enterprises in Boston, where they may also have the chance to join MIT Sloan as a visiting fellow for one semester. In addition, MBA students will receive MIT non-diploma certificates on successful completion of the International MBA program. Lingnan conducts dual-degree programs with ESCP Europe and Rotterdam School of Management, Erasmus University. Lingnan encourages second-year MBA students to study at either of the two top business schools in Europe. In addition, the Lingnan MBA center organises study tours with partner schools in Europe, including ESCP Europe, Antwerp School of Management and London Business School. The Lingnan MBA program emphasises Action Learning in the core of its curriculum. MBA students are assigned specific projects that emphasise applying traditional classroom learning into real-life settings while addressing

70 62 EXECUTIVE

• Productivity, Strategy, Profitability GLOBAL • Productivity, Strategy, Profitability

THE LINGNAN MBA CENTER ORGANISES STUDY TOURS WITH PARTNER SCHOOLS IN EUROPE, INCLUDING ESCP EUROPE, ANTWERP SCHOOL OF MANAGEMENT AND LONDON BUSINESS SCHOOL.

Lingnan is located in Guangzhou, the geometrical center of the economic circle of Southeast Asia and therefore it is equidistant from Japan and Southeast Asian countries within a flight voyage of 3 to 4 hours in general. Guangzhou is an open coastal city neighbouring Hong Kong and Macao, and the economic, political, and cultural center, and also the commercial center. It is located in the center of the Pearl River Delta, one of the most economically dynamic and flourishing areas in China. Guangzhou is a major industrial base, manufacturing base and service industrial base in China, with complete industrial supporting facilities and clusters. In particular, the three pillar industries, namely auto, petrochemicals and electronic information, have seen the establishment of modern industrial systems. EG

critical business issues facing corporate clients. Each year around 20 projects are provided to students. Lingnan also creates many integrated international projects, including the China Lab Program with MIT Sloan, the China Seminar Series with the Carlson School of Management For more information please, visit: http://www.lingnan.sysu.edu.cn/EN/index.html and Global Business Projects.

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Steel Appliances and Center Island. The Conversation Bar is perfect for Entertaining! A Presidential Size Master Suite with Fireplace has custom Walk-in Closet and sumptuous Bath featuring Spa Tub with Fireplace overlooking the Lake! Double Sinks. Bidet. Walk-in Stone Shower. 4 additional Bedrooms. The 5th Bedroom is currently a Large Bunk Room but would be ideal for a Media Room or Studio! Level Entry Garage opens to Kitchen for easy access. Game Room has Stone Floor to Ceiling Fireplace, Custom Chandelier and opens to a quiet covered Patio. Large Trex Deck and Covered Patio. The Balcony off Master Suite overlooks beautiful Pine Trees and the Lake. Security System. Composition Roof. Walking Distance to 1/2 Double Dock, south facing within North Bay. Close to Tavern Bay Beach Club with Sandy Beach. Location!! Wow! $1,495,000.

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EXECUTIVE EDUCATION

Association of MBAs

Building a responsible and sustainable future for management education Digital futures, responsible management, building international alliances and disruption were key topics debated by Business School leaders at AMBA’s Global Conference, says Andrew Main Wilson. The start of May marked the beginning of AMBA and BGA’s busy international schedule and, this year, we hosted the largest conference for Business School Deans and Directors in the breath-taking city of Istanbul, Turkey. Article by

Andrew Main Wilson

CEO, ASSOCIATION OF MBAS

he conference sessions were designed to challenge the status quo and explored topics that include poverty, diversity, artificial intelligence (AI), collaboration, social media, disruption, MBA rankings, entrepreneurship, and emerging markets. With AI estimated to drive a productivity and consumption boost of up to $16tn USD by 2030, the majority of CEOs acknowledge that AI technology will significantly change the way they do business in the coming years.

THE ROLE OF ARTIFICIAL INTELLIGENCE Rob McCargow, Director of AI at PwC, shared best practices on how business leadership should prioritise the responsible adoption of technology, in a way that delivers measurable value while maintaining trust. He was followed on stage by Andrea Sianesi, Dean of MIP Politecnico di Milano Graduate School of Business, who put the AI conversation into the context of business education. Sianesi shared his thoughts on how AI can create a competitive advantage for Business Schools and outlined how his School has developed an innovative AI platform, in partnership with Microsoft, to ensure personalised, continuous learning for its students and alumni. Francisco Veloso, Dean of one of the world’s most innovative Business Schools at Imperial College, shared his vision of how technology is changing business education and discussed the creation of the Future of Management Education Alliance, a collaborative initiative of leading Business Schools around the world. On the topic of responsible management, UNICEF’s Chief Operating Officer, Claire Fox, explained how political instability, global conflicts, and increasing climate change mean all sectors of society – and the education sector in particular – have a crucial role to play in creating a safe, harmonious and sustainable world. And Kader

Photo: dotshock / Shutterstock.com

Kaneye, President and CEO of ILIMI African Development University shared his inspiring story of creating a new Business School in Niger, one of the least developed countries on Earth, while putting forward his inspirational ambition to combine global best practice with management education that is relevant to the local context. Additionally, AMBA’s research team showcased its campaign to enhance diversity and inclusion

THE CONFERENCE SESSIONS WERE DESIGNED TO CHALLENGE THE STATUS QUO AND EXPLORED TOPICS THAT INCLUDE POVERTY, DIVERSITY, ARTIFICIAL INTELLIGENCE (AI)...

• Productivity, Strategy, Profitability

in business education, we hosted our inaugural meeting for female leaders in business education and a panel debate was held on enrolment diversity and attracting female MBA applicants, featuring Ritika Israni, winner of AMBA’s MBA Student of the Year Award 2019. THE ROLE OF ENTREPRENEURSHIP Entrepreneurship has become a distinguishing feature of graduate programmes, with much importance placed in the creation of collaborative communities that support venture creation. Using Singapore Management University as an example, its Dean, Gerard George, shared insights on how Business Schools can foster a vibrant entrepreneurial ecosystem. Reflecting on the conference and the strength of collaboration within the AMBA & BGA family, I came away with a better understanding of the seemingly insurmountable challenges we’re facing as an industry but, more importantly, encouraged that, as a powerful network, we are in great shape to address them. EG

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Your Extraordinary Playground

A celebration of the Indian Ocean, this Villa will ignite the imagination with adventure to be had, local culture to be explored and soul-enriching discoveries designed with meaning and purpose. The Villa connects global wanderers to the pulse of the Maldives through an inspired experience that quenches curiosity and nourishes the senses. Arrive and transform, and indulge in the adventure that stirs within.

Supporting the resort’s philosophy of innovation and its dedication to creating extraordinary moments in the heart of the Indian Ocean. Tailored to the unique desires of different travellers with experiences ranging from adventure, food and entertainment to wellness, culture and sustainability, the menus are titled The Wanderers, The Flavors, The Soul and The Thrill. Guests who book this villa will work with a dedicated Reservations Team to curate their own journey, borrowing inspiration from the four menus to ultimately create a meaningful and personalised journey in the Indian Ocean and immerse themselves in a variety of transcendent experiences above and below the surface of the ocean.

Guests staying at the villa will receive four exclusive and customisable experiences that offers a transformative journey in one of the world’s most breath-taking natural environments as guests are fully immersed in the wonders of the abundant marine eco-system above and below the Indian Ocean. While pushing the boundaries of engineering, This Villa is not only defined by its physical structure, but even more so by the wholly unique offerings globally connected guests can enjoy while staying in the innovative residence.

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EXECUTIVE CLASSES. EXCEPTIONAL VALUE. The University of Tampaâ€™s AACSB-accredited graduate business programs prepare students with the invaluable skills and career connections needed for success in todayâ€™s rapidly evolving global economy. Students benefit from hands-on learning, one-on-one faculty mentoring and a degree from a private, top-ranked university. Within six months of graduation, 94 percent of alumni report achieving their goals, including a new job or a promotion.

Ready for extraordinary? Visit ut.edu/graduate or call (813) 258-7409.

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Ranked as a top place to live, work and play, the Tampa Bay area is home to more than 4 million people. UT’s ideal downtown location and dynamic relationship with the business community, combined with the area’s low cost of living, semi-tropical climate and status as a destination city, make the Sykes College of Business the next logical stop on your career path.

THE UNIVERSITY OF TAMPA IS PROUD TO BE: • Named by The Princeton Review as one of the 294 best business schools in the world • Rated among the top 87 full-time MBA programs in the U.S. by Bloomberg Businessweek • Named the #7 best value business school in the U.S. by Business Insider • Listed in U.S. News & World Report among the nation’s best part-time MBA programs

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